Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change to Modify the Application of the Minimum Bid Price Compliance Periods and the Delisting Appeals Process for Bid Price Non-Compliance in Listing Rules 5810 and 5815 Under Certain Circumstances, 68228-68231 [2024-18911]

Download as PDF 68228 Federal Register / Vol. 89, No. 164 / Friday, August 23, 2024 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION [Release No. 34–100767; File No. SR– NASDAQ–2024–045] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change to Modify the Application of the Minimum Bid Price Compliance Periods and the Delisting Appeals Process for Bid Price Non-Compliance in Listing Rules 5810 and 5815 Under Certain Circumstances August 19, 2024. 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 August 6, 2024, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to modify the delisting process for securities that fail to regain compliance with the bid price requirement following a second compliance period and for securities that have had a reverse stock split over the prior one-year period. 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. khammond on DSKJM1Z7X2PROD with NOTICES 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. 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 17:23 Aug 22, 2024 Jkt 262001 1. Purpose Nasdaq is proposing to amend Listing Rules 5810 and 5815 to provide that a company will be suspended from trading on Nasdaq if the company has been non-compliant with the $1.00 bid price requirement for more than 360 days. In addition, Nasdaq is proposing to modify the listing standards such that Nasdaq will immediately send a Delisting Determination, as defined in Rule 5805(h), without any compliance period, to any company that becomes non-compliant with the $1.00 minimum bid price requirement if the company effected a reverse stock split within the prior one-year period. Nasdaq listing standards require a company’s equity securities listed on the Nasdaq Global Select, Global and Capital Markets to maintain a closing bid price that is no less than one dollar per share (the ‘‘Bid Price Requirement’’).3 Upon a company’s failure to satisfy the applicable Bid Price Requirement, Rule 5810(c)(3)(A) provides for an automatic compliance period of 180 calendar days for the company to achieve compliance with the Bid Price Requirement.4 Subject to certain requirements,5 including 3 Each tier of Nasdaq includes a requirement that specified securities maintain a $1.00 minimum bid price. See, Rule 5550(a)(2) (Primary Equity Security listed on the Nasdaq Capital Market), Rule 5555(a)(1) (Preferred Stock and Secondary Classes of Common Stock listed on the Nasdaq Capital Market), 5450(a)(1) (Primary Equity Security listed on the Nasdaq Global or Global Select Markets), Rule 5460(a)(3)(Preferred Stock and Secondary Classes of Common Stock listed on the Nasdaq Global or Global Select Markets). The $1.00 minimum bid price requirement does not apply to Other Securities listed pursuant to the Rule 5700 Series, rights, warrants, convertible debt, and subscription receipts. 4 A failure to meet this requirement occurs when a security’s closing bid price is below $1.00 for a period of 30 consecutive trading days. Compliance is achieved by meeting the applicable standard for a minimum of 10 consecutive business days during the applicable compliance period, unless Staff exercises its discretion to extend this 10 day period as discussed in Rule 5810(c)(3)(H). See Rule 5810(c)((3)(A). 5 Listing Rule 5810(c)(3)(A)(ii) states that if a Company listed on the Capital Market is not deemed in compliance before the expiration of the 180 day compliance period, it will be afforded an additional 180 day compliance period, provided that on the 180th day of the first compliance period it meets the applicable market value of publicly held shares requirement for continued listing and all other applicable standards for initial listing on the Capital Market (except the bid price requirement) based on the Company’s most recent public filings and market information and notifies Nasdaq of its intent to cure this deficiency. If a Company does not indicate its intent to cure the deficiency, or if it does not appear to Nasdaq that PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 notifying Nasdaq of the company’s intent to cure this deficiency, a company listed on, or that transfers to, the Nasdaq Capital Market may be provided with a second 180-day compliance period. If a company is not eligible for the second compliance period, or the company is eligible but does not resolve the bid price concern during the second compliance period, the company is issued a Delisting Determination under Rule 5810 with respect to that security, which can be appealed to a Nasdaq Listing Qualifications Hearings Panel. The Panel can allow a company up to an additional 180 days from the date of the Delisting Determination for the company to regain compliance.6 The bid price rules truncate these compliance periods in two circumstances. First, Listing Rule 5810(c)(3)(A)(iii) provides that if a company’s security has a closing bid price of $0.10 or less for 10 consecutive trading days, Nasdaq must issue a Delisting Determination with respect to that security, notwithstanding any otherwise available compliance period. Second, Listing Rule 5810(c)(3)(A)(iv) provides that if a company’s security fails to meet the continued listing requirement for minimum bid price and the company has effected one or more reverse stock splits over the prior twoyear period with a cumulative ratio of 250 shares or more to one, then the company is not eligible for any compliance periods and Nasdaq must issue a Delisting Determination with respect to that security. Based on Nasdaq’s experience with the rules, Nasdaq is proposing two changes to the bid price requirements for listed companies to better protect investors. Suspension After 360 Days of NonCompliance Nasdaq has observed that some companies do not regain compliance during the second 180-day compliance period notwithstanding the company’s notification to Nasdaq of its intent to do so. In these circumstances, Nasdaq issues a Delisting Determination; however, as described above, the company could continue its listing by appealing that decision to a Hearings Panel, which has the discretion to it is possible for the Company to cure the deficiency, the Company will not be eligible for the second grace period. If the Company has publicly announced information (e.g., in an earnings release) indicating that it no longer satisfies the applicable listing criteria, it shall not be eligible for the additional compliance period under this rule. 6 See Rule 5815(c) (Scope of the Hearings Panel’s Discretion). E:\FR\FM\23AUN1.SGM 23AUN1 Federal Register / Vol. 89, No. 164 / Friday, August 23, 2024 / Notices khammond on DSKJM1Z7X2PROD with NOTICES provide up to 180 additional days from the date of the Delisting Determination.7 Accordingly, a company that failed to regain compliance with the Bid Price Requirement may request a review of a Delisting Determination and seek an exception to the requirements from the Hearings Panel and could remain listed and trading on Nasdaq pursuant to an exception granted by the Panel. As a result, a company may be continuously deficient with the Bid Price Requirement and continue trading on Nasdaq for more than 360 days (but not more than 540 days). Nasdaq believes that two consecutive compliance periods for a total of 360 days is a sufficient period of time for a company to regain compliance with the Bid Price Requirement, even if the company is required to obtain stockholder approval to effect a reverse stock split by the jurisdiction where the company is incorporated. Nasdaq provides a company with a second bid price compliance period only if the company reviewed its circumstances and notified Nasdaq that it intends to cure the bid price deficiency by effecting a reverse stock split within the second 180-day compliance period. As such, Nasdaq believes that it is not appropriate for a company in these circumstances to continue trading on Nasdaq during the pendency of the Hearings Panel review process. Instead, Nasdaq proposes to amend Rule 5815 to remove the stay provision in these situations so that the company’s securities will be suspended from trading on Nasdaq during the pendency of the Hearings Panel’s review.8 Specifically, Nasdaq proposes to adopt Listing Rule 5815(a)(1)(B)(ii)d. to provide that notwithstanding the general rule that a timely request for a hearing shall ordinarily stay the suspension and delisting action pending the issuance of a written panel decision, a request for a hearing shall not stay the suspension of the securities from trading where the matter relates to a request made by a company that was afforded the second 180-day compliance period described in Rule 5810(c)(3)(A)(ii) and that failed to regain compliance with the minimum bid price requirement during that period. For 7 See Rule 5815(c)(1)(A), which provides that the Hearings Panel may, where it deems appropriate grant an exception to the continued listing standards for a period not to exceed 180 days from the date of the Delisting Determination with respect to the deficiency for which the exception is granted. 8 Nasdaq notes that if a company was not afforded the second 180-day compliance period, the company would not be affected by this proposal and its security would not be suspended from trading on Nasdaq during an appeal to the Hearings Panel, if any. VerDate Sep<11>2014 17:23 Aug 22, 2024 Jkt 262001 clarity, Nasdaq proposes to note that pursuant to Rule 5810(c)(3)(A), a company achieves compliance with the minimum bid price requirement by meeting the applicable standard for a minimum of 10 consecutive business days, unless Staff exercises its discretion to extend this 10 day period as discussed in Rule 5810(c)(3)(H). A company that is suspended under the proposed rule could appeal the Delisting Determination to a Hearings Panel, but its securities would trade in the over-the-counter (OTC) market while that appeal is pending. Pursuant to Listing Rule 5815(c)(1)(A) the Hearings Panel will continue to have discretion, where it deems appropriate, to provide an exception for up to 180 days from the Delisting Determination date for the company to regain compliance with the Bid Price Requirement. Pursuant to Listing Rule 5815(c)(1)(E) the Hearings Panel will also continue to have the authority to find the company in compliance with all applicable listing standards and reinstate the trading of the company’s securities on Nasdaq (e.g., if the company effects a reverse stock split and maintains a $1.00 closing bid price for at least 10 consecutive days while trading in the OTC market). Excessive Reverse Stock Splits As described above, upon a company’s failure to satisfy the applicable Bid Price Requirement, Rule 5810(c)(3)(A) provides for an automatic compliance period of 180 calendar days for the company to achieve compliance with the Bid Price Requirement. The process of providing an automatic 180day compliance period is designed to allow adequate time for a company facing temporary business issues, a temporary decrease in the market value of its securities, or temporary market conditions to regain compliance with the Bid Price Requirement. However, Nasdaq has observed that some companies, typically those in financial distress or experiencing a prolonged operational downturn, engage in a pattern of repeated reverse stock splits. Nasdaq believes that such behavior is often indicative of deep financial or operational distress within such companies rendering them inappropriate for trading on Nasdaq for investor protection reasons. In these situations, Nasdaq has observed that the challenges facing such companies, generally, are not temporary and may be so severe that the company is not likely to regain compliance within the prescribed compliance period and will continue oscillating between compliance and non-compliance with PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 68229 the Bid Price Requirement. Moreover, a pattern of recurring bid price noncompliance can be a leading indicator of other listing compliance concerns. As a result, these companies often become subject to delisting for other reasons during the compliance periods. In 2020, Nasdaq amended the rules to require the issuance of a Delisting Determination if a company falls out of compliance with the Bid Price Requirement after completing one or more reverse stock splits resulting in a cumulative ratio of 250 shares or more to one over the two-year period before such non-compliance (the ‘‘2020 Rule’’).9 As described above, in these cases the company is not afforded an automatic compliance period. Notwithstanding this rule change, Nasdaq continues to observe some companies engaging in a pattern of effecting consecutive reverse stock splits, which are often accompanied by dilutive issuances of securities. Accordingly, Nasdaq proposes to further enhance investor protections by immediately initiating the delisting process (rather than providing a 180-day compliance period) for any company’s security that becomes non-compliant with the Bid Price Requirement if, in the prior one-year period, the company conducted a reverse stock split (regardless of the ratio). The company could appeal that delisting notification to the Hearings Panel, where it could receive up to 180 days to regain compliance, as described above. Specifically, Nasdaq proposes to amend Listing Rule 5810(c)(3)(A)(iv) to provide that if a company’s security fails to meet the continued listing requirement for minimum bid price and the company has effected a reverse stock split over the prior one-year period then the company shall not be eligible for any compliance period specified in Rule 5810(c)(3)(A) and the Listing Qualifications Department shall issue a Delisting Determination under Rule 5810 with respect to that security.10 The cumulative impact of the proposed rule change and the 2020 Rule would be as follows: • A company that effected a reverse stock split of any ratio will be subject to delisting if it falls out of compliance with the Bid Price Requirement within one year of the previous reverse stock split. 9 Securities Exchange Act Release No. 87982 (January 15, 2020), 85 FR 3736 (January 22, 2020) (SR–Nasdaq–2020–001). 10 For the avoidance of doubt, the proposed rule would apply to a company even if the company was in compliance with the Bid Price Requirement at the time of its prior reverse stock split. E:\FR\FM\23AUN1.SGM 23AUN1 68230 Federal Register / Vol. 89, No. 164 / Friday, August 23, 2024 / Notices • A company that effected one or more reverse stock split with a cumulative ratio of 1-for-250 or higher will be subject to delisting if it falls out of compliance with the Bid Price Requirement within two years of the reverse stock split(s). khammond on DSKJM1Z7X2PROD with NOTICES 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,11 in general, and furthers the objectives of Section 6(b)(5) of the Act,12 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 by enhancing Nasdaq’s listing requirements and limiting the time that a security can remain listed while non-compliant with the Bid Price Requirement or becoming non-compliant with the Bid Price Requirement within one year following a reverse stock split. In that regard, Nasdaq has observed that the challenges facing such companies generally are not temporary and may be so severe that the company is not likely to regain compliance within the prescribed compliance period. Moreover, the price concerns with these companies can be a leading indicator of other listing compliance concerns, and these companies often become subject to delisting for other reasons during the compliance periods. While listed, these securities are exempt from the ‘‘Penny Stock Rules,’’ 13 which provide enhanced investor protections to prevent fraud and safeguard against potential market manipulation. In particular, the Penny Stock Rules generally require that broker-dealers provide a disclosure document to their customers describing the risk of investing in Penny Stocks and approve customer accounts for transactions in Penny Stocks. Nasdaq believes that an exemption from these Penny Stock requirements may not be appropriate for consistently low priced stocks and stocks that are trading below $1 after completing a reverse stock splits over the prior year because these securities may have similar characteristics to Penny Stocks. Nasdaq therefore believes it is appropriate to subject these securities to heightened scrutiny given the availability of the 11 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 13 See Exchange Act Rules 3a51–1, 17 CFR 240.3a51–1, and 15g–1 to 15g–100, 17 CFR 240.5g– 1 et seq. 12 15 VerDate Sep<11>2014 17:23 Aug 22, 2024 Jkt 262001 exemption to securities listed on Nasdaq. Nasdaq also believes that the proposal to amend Listing Rule 5815(a)(1)(B)(ii) to provide that a hearing request shall not stay the suspension of the securities from trading when the matter relates to a request made by a company that was afforded the second 180-day compliance period described in Rule 5810(c)(3)(A)(ii) and that failed to regain compliance with the minimum bid price requirement during that period is designed to protect investors and the public interest. In particular, this change will prevent continued trading in such company’s securities until an independent Hearings Panel reviews the Delisting Determination and determines that continued trading on Nasdaq is appropriate. Finally, Nasdaq believes the proposed rule change furthers the objectives of Section 6(b)(7) of the Act in that it continues to provide a fair procedure for companies subject to these enhanced listing requirements. These companies can seek review of a Delisting Determination from a Hearings Panel, which can afford the company additional time to regain compliance, and can appeal the Hearings Panel decision to the Nasdaq Listing and Hearing Review Council.14 As a result, Nasdaq believes that the proposed rule appropriately balances the need for appropriate listing standards with the statutory requirement to protect investors and the public interest. 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. While Nasdaq does not believe there will be any impact on competition from the proposed change, any impact on competition that does arise will be necessary to better protect investors, in furtherance of a central purpose of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal 14 See PO 00000 Listing Rules 5815 and 5820, respectively. Frm 00106 Fmt 4703 Sfmt 4703 Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission shall: (a) by order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number SR– NASDAQ–2024–045 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–2024–045. 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication E:\FR\FM\23AUN1.SGM 23AUN1 Federal Register / Vol. 89, No. 164 / Friday, August 23, 2024 / Notices submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–NASDAQ–2024–045 and should be submitted on or before September 13, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Vanessa A. Countryman, Secretary. [FR Doc. 2024–18911 Filed 8–22–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–517, OMB Control No. 3235–0575] khammond on DSKJM1Z7X2PROD with NOTICES Proposed Collection; Comment Request; Extension: Regulation AC 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 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the existing collection of information provided for in Regulation Analyst Certification (‘‘Regulation AC’’) (17 CFR 242.500–505, under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.)). The Commission plans to submit this existing collection of information to the Office of Management and Budget (‘‘OMB’’) for extension and approval. Regulation AC requires that research reports published, circulated, or provided by a broker or dealer or covered person contain a statement attesting that the views expressed in each research report accurately reflect the analyst’s personal views and whether or not the research analyst received or will receive any compensation in connection with the views or recommendations expressed in the research report. Regulation AC also requires broker-dealers to, on a quarterly basis, make, keep, and maintain records of research analyst statements regarding whether the views expressed in public appearances accurately reflected the analyst’s personal views, and whether any part of the analyst’s compensation is related to the specific recommendations or views expressed in the public appearance. Regulation AC also requires that research prepared by foreign persons be presented to U.S. 15 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:23 Aug 22, 2024 Jkt 262001 persons pursuant to Securities Exchange Act Rule 15a–6 and that broker-dealers notify associated persons if they would be covered by the regulation. Regulation AC excludes the news media from its coverage. The Commission estimates that Regulation AC imposes an aggregate annual time burden of approximately 41,384 hours. The Commission estimates that the total annual internal cost of compliance for the 41,384 hours is approximately $22,891,896. Written comments are invited on: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission’s estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted by October 22, 2024. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. Please direct your written comments to: Austin Gerig, Director/Chief Data Officer, Securities and Exchange Commission, c/o Oluwaseun Ajayi, 100 F Street NE, Washington, DC 20549, or send an email to: PRA_Mailbox@ sec.gov. DATES: Dated: August 19, 2024. Vanessa A. Countryman, Secretary. SUMMARY: [FR Doc. 2024–18919 Filed 8–22–24; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #20415 and #20416; Iowa Disaster Number IA–20005] Presidential Declaration Amendment of a Major Disaster for the State of Iowa Small Business Administration. Amendment 7. AGENCY: ACTION: This is an amendment of the Presidential declaration of a major disaster for the State of Iowa (FEMA– 4796–DR), dated 06/24/2024. Incident: Severe Storms, Flooding, Straight-line Winds, and Tornadoes. Incident Period: 06/16/2024 through 07/23/2024. SUMMARY: PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 68231 Issued on 08/16/2024. Physical Loan Application Deadline Date: 10/22/2024. Economic Injury (EIDL) Loan Application Deadline Date: 03/24/2025. ADDRESSES: Visit the MySBA Loan Portal at https://lending.sba.gov to apply for a disaster assistance loan. FOR FURTHER INFORMATION CONTACT: Alan Escobar, Office of Disaster Recovery & Resilience, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205–6734. SUPPLEMENTARY INFORMATION: The notice of the President’s major disaster declaration for the State of Iowa, dated 06/24/2024, is hereby amended to extend the deadline for filing applications for physical damages as a result of this disaster to 10/22/2024. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Number 59008) Rafaela Monchek, Acting Associate Administrator, Office of Disaster Recovery & Resilience. [FR Doc. 2024–18885 Filed 8–22–24; 8:45 am] BILLING CODE 8026–09–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #20407 and #20408; NEW MEXICO Disaster Number NM–20004] Presidential Declaration Amendment of a Major Disaster for the State of New Mexico U.S. Small Business Administration. ACTION: Amendment 3. AGENCY: This is an amendment of the Presidential declaration of a major disaster for the State of New Mexico (FEMA–4795–DR), dated 06/20/2024. Incident: South Fork Fire, Salt Fire, and Flooding. Incident Period: 06/17/2024 and continuing. DATES: Issued on 08/15/2024. Physical Loan Application Deadline Date: 10/19/2024. Economic Injury (EIDL) Loan Application Deadline Date: 03/20/2025. ADDRESSES: Visit the MySBA Loan Portal at https://lending.sba.gov to apply for a disaster assistance loan. FOR FURTHER INFORMATION CONTACT: Vanessa Morgan, Office of Disaster Recovery & Resilience, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205–6734. SUPPLEMENTARY INFORMATION: The notice of the President’s major disaster E:\FR\FM\23AUN1.SGM 23AUN1

Agencies

[Federal Register Volume 89, Number 164 (Friday, August 23, 2024)]
[Notices]
[Pages 68228-68231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18911]



[[Page 68228]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100767; File No. SR-NASDAQ-2024-045]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change to Modify the Application of 
the Minimum Bid Price Compliance Periods and the Delisting Appeals 
Process for Bid Price Non-Compliance in Listing Rules 5810 and 5815 
Under Certain Circumstances

August 19, 2024.
    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 August 6, 2024, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify the delisting process for 
securities that fail to regain compliance with the bid price 
requirement following a second compliance period and for securities 
that have had a reverse stock split over the prior one-year period.
    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
    Nasdaq is proposing to amend Listing Rules 5810 and 5815 to provide 
that a company will be suspended from trading on Nasdaq if the company 
has been non-compliant with the $1.00 bid price requirement for more 
than 360 days. In addition, Nasdaq is proposing to modify the listing 
standards such that Nasdaq will immediately send a Delisting 
Determination, as defined in Rule 5805(h), without any compliance 
period, to any company that becomes non-compliant with the $1.00 
minimum bid price requirement if the company effected a reverse stock 
split within the prior one-year period.
    Nasdaq listing standards require a company's equity securities 
listed on the Nasdaq Global Select, Global and Capital Markets to 
maintain a closing bid price that is no less than one dollar per share 
(the ``Bid Price Requirement'').\3\ Upon a company's failure to satisfy 
the applicable Bid Price Requirement, Rule 5810(c)(3)(A) provides for 
an automatic compliance period of 180 calendar days for the company to 
achieve compliance with the Bid Price Requirement.\4\ Subject to 
certain requirements,\5\ including notifying Nasdaq of the company's 
intent to cure this deficiency, a company listed on, or that transfers 
to, the Nasdaq Capital Market may be provided with a second 180-day 
compliance period. If a company is not eligible for the second 
compliance period, or the company is eligible but does not resolve the 
bid price concern during the second compliance period, the company is 
issued a Delisting Determination under Rule 5810 with respect to that 
security, which can be appealed to a Nasdaq Listing Qualifications 
Hearings Panel. The Panel can allow a company up to an additional 180 
days from the date of the Delisting Determination for the company to 
regain compliance.\6\
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    \3\ Each tier of Nasdaq includes a requirement that specified 
securities maintain a $1.00 minimum bid price. See, Rule 5550(a)(2) 
(Primary Equity Security listed on the Nasdaq Capital Market), Rule 
5555(a)(1) (Preferred Stock and Secondary Classes of Common Stock 
listed on the Nasdaq Capital Market), 5450(a)(1) (Primary Equity 
Security listed on the Nasdaq Global or Global Select Markets), Rule 
5460(a)(3)(Preferred Stock and Secondary Classes of Common Stock 
listed on the Nasdaq Global or Global Select Markets). The $1.00 
minimum bid price requirement does not apply to Other Securities 
listed pursuant to the Rule 5700 Series, rights, warrants, 
convertible debt, and subscription receipts.
    \4\ A failure to meet this requirement occurs when a security's 
closing bid price is below $1.00 for a period of 30 consecutive 
trading days. Compliance is achieved by meeting the applicable 
standard for a minimum of 10 consecutive business days during the 
applicable compliance period, unless Staff exercises its discretion 
to extend this 10 day period as discussed in Rule 5810(c)(3)(H). See 
Rule 5810(c)((3)(A).
    \5\ Listing Rule 5810(c)(3)(A)(ii) states that if a Company 
listed on the Capital Market is not deemed in compliance before the 
expiration of the 180 day compliance period, it will be afforded an 
additional 180 day compliance period, provided that on the 180th day 
of the first compliance period it meets the applicable market value 
of publicly held shares requirement for continued listing and all 
other applicable standards for initial listing on the Capital Market 
(except the bid price requirement) based on the Company's most 
recent public filings and market information and notifies Nasdaq of 
its intent to cure this deficiency. If a Company does not indicate 
its intent to cure the deficiency, or if it does not appear to 
Nasdaq that it is possible for the Company to cure the deficiency, 
the Company will not be eligible for the second grace period. If the 
Company has publicly announced information (e.g., in an earnings 
release) indicating that it no longer satisfies the applicable 
listing criteria, it shall not be eligible for the additional 
compliance period under this rule.
    \6\ See Rule 5815(c) (Scope of the Hearings Panel's Discretion).
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    The bid price rules truncate these compliance periods in two 
circumstances. First, Listing Rule 5810(c)(3)(A)(iii) provides that if 
a company's security has a closing bid price of $0.10 or less for 10 
consecutive trading days, Nasdaq must issue a Delisting Determination 
with respect to that security, notwithstanding any otherwise available 
compliance period. Second, Listing Rule 5810(c)(3)(A)(iv) provides that 
if a company's security fails to meet the continued listing requirement 
for minimum bid price and the company has effected one or more reverse 
stock splits over the prior two-year period with a cumulative ratio of 
250 shares or more to one, then the company is not eligible for any 
compliance periods and Nasdaq must issue a Delisting Determination with 
respect to that security.
    Based on Nasdaq's experience with the rules, Nasdaq is proposing 
two changes to the bid price requirements for listed companies to 
better protect investors.
Suspension After 360 Days of Non-Compliance
    Nasdaq has observed that some companies do not regain compliance 
during the second 180-day compliance period notwithstanding the 
company's notification to Nasdaq of its intent to do so. In these 
circumstances, Nasdaq issues a Delisting Determination; however, as 
described above, the company could continue its listing by appealing 
that decision to a Hearings Panel, which has the discretion to

[[Page 68229]]

provide up to 180 additional days from the date of the Delisting 
Determination.\7\ Accordingly, a company that failed to regain 
compliance with the Bid Price Requirement may request a review of a 
Delisting Determination and seek an exception to the requirements from 
the Hearings Panel and could remain listed and trading on Nasdaq 
pursuant to an exception granted by the Panel. As a result, a company 
may be continuously deficient with the Bid Price Requirement and 
continue trading on Nasdaq for more than 360 days (but not more than 
540 days).
---------------------------------------------------------------------------

    \7\ See Rule 5815(c)(1)(A), which provides that the Hearings 
Panel may, where it deems appropriate grant an exception to the 
continued listing standards for a period not to exceed 180 days from 
the date of the Delisting Determination with respect to the 
deficiency for which the exception is granted.
---------------------------------------------------------------------------

    Nasdaq believes that two consecutive compliance periods for a total 
of 360 days is a sufficient period of time for a company to regain 
compliance with the Bid Price Requirement, even if the company is 
required to obtain stockholder approval to effect a reverse stock split 
by the jurisdiction where the company is incorporated. Nasdaq provides 
a company with a second bid price compliance period only if the company 
reviewed its circumstances and notified Nasdaq that it intends to cure 
the bid price deficiency by effecting a reverse stock split within the 
second 180-day compliance period. As such, Nasdaq believes that it is 
not appropriate for a company in these circumstances to continue 
trading on Nasdaq during the pendency of the Hearings Panel review 
process. Instead, Nasdaq proposes to amend Rule 5815 to remove the stay 
provision in these situations so that the company's securities will be 
suspended from trading on Nasdaq during the pendency of the Hearings 
Panel's review.\8\
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    \8\ Nasdaq notes that if a company was not afforded the second 
180-day compliance period, the company would not be affected by this 
proposal and its security would not be suspended from trading on 
Nasdaq during an appeal to the Hearings Panel, if any.
---------------------------------------------------------------------------

    Specifically, Nasdaq proposes to adopt Listing Rule 
5815(a)(1)(B)(ii)d. to provide that notwithstanding the general rule 
that a timely request for a hearing shall ordinarily stay the 
suspension and delisting action pending the issuance of a written panel 
decision, a request for a hearing shall not stay the suspension of the 
securities from trading where the matter relates to a request made by a 
company that was afforded the second 180-day compliance period 
described in Rule 5810(c)(3)(A)(ii) and that failed to regain 
compliance with the minimum bid price requirement during that period. 
For clarity, Nasdaq proposes to note that pursuant to Rule 
5810(c)(3)(A), a company achieves compliance with the minimum bid price 
requirement by meeting the applicable standard for a minimum of 10 
consecutive business days, unless Staff exercises its discretion to 
extend this 10 day period as discussed in Rule 5810(c)(3)(H).
    A company that is suspended under the proposed rule could appeal 
the Delisting Determination to a Hearings Panel, but its securities 
would trade in the over-the-counter (OTC) market while that appeal is 
pending. Pursuant to Listing Rule 5815(c)(1)(A) the Hearings Panel will 
continue to have discretion, where it deems appropriate, to provide an 
exception for up to 180 days from the Delisting Determination date for 
the company to regain compliance with the Bid Price Requirement. 
Pursuant to Listing Rule 5815(c)(1)(E) the Hearings Panel will also 
continue to have the authority to find the company in compliance with 
all applicable listing standards and reinstate the trading of the 
company's securities on Nasdaq (e.g., if the company effects a reverse 
stock split and maintains a $1.00 closing bid price for at least 10 
consecutive days while trading in the OTC market).
Excessive Reverse Stock Splits
    As described above, upon a company's failure to satisfy the 
applicable Bid Price Requirement, Rule 5810(c)(3)(A) provides for an 
automatic compliance period of 180 calendar days for the company to 
achieve compliance with the Bid Price Requirement. The process of 
providing an automatic 180-day compliance period is designed to allow 
adequate time for a company facing temporary business issues, a 
temporary decrease in the market value of its securities, or temporary 
market conditions to regain compliance with the Bid Price Requirement. 
However, Nasdaq has observed that some companies, typically those in 
financial distress or experiencing a prolonged operational downturn, 
engage in a pattern of repeated reverse stock splits.
    Nasdaq believes that such behavior is often indicative of deep 
financial or operational distress within such companies rendering them 
inappropriate for trading on Nasdaq for investor protection reasons. In 
these situations, Nasdaq has observed that the challenges facing such 
companies, generally, are not temporary and may be so severe that the 
company is not likely to regain compliance within the prescribed 
compliance period and will continue oscillating between compliance and 
non-compliance with the Bid Price Requirement. Moreover, a pattern of 
recurring bid price non-compliance can be a leading indicator of other 
listing compliance concerns. As a result, these companies often become 
subject to delisting for other reasons during the compliance periods.
    In 2020, Nasdaq amended the rules to require the issuance of a 
Delisting Determination if a company falls out of compliance with the 
Bid Price Requirement after completing one or more reverse stock splits 
resulting in a cumulative ratio of 250 shares or more to one over the 
two-year period before such non-compliance (the ``2020 Rule'').\9\ As 
described above, in these cases the company is not afforded an 
automatic compliance period. Notwithstanding this rule change, Nasdaq 
continues to observe some companies engaging in a pattern of effecting 
consecutive reverse stock splits, which are often accompanied by 
dilutive issuances of securities.
---------------------------------------------------------------------------

    \9\ Securities Exchange Act Release No. 87982 (January 15, 
2020), 85 FR 3736 (January 22, 2020) (SR-Nasdaq-2020-001).
---------------------------------------------------------------------------

    Accordingly, Nasdaq proposes to further enhance investor 
protections by immediately initiating the delisting process (rather 
than providing a 180-day compliance period) for any company's security 
that becomes non-compliant with the Bid Price Requirement if, in the 
prior one-year period, the company conducted a reverse stock split 
(regardless of the ratio). The company could appeal that delisting 
notification to the Hearings Panel, where it could receive up to 180 
days to regain compliance, as described above. Specifically, Nasdaq 
proposes to amend Listing Rule 5810(c)(3)(A)(iv) to provide that if a 
company's security fails to meet the continued listing requirement for 
minimum bid price and the company has effected a reverse stock split 
over the prior one-year period then the company shall not be eligible 
for any compliance period specified in Rule 5810(c)(3)(A) and the 
Listing Qualifications Department shall issue a Delisting Determination 
under Rule 5810 with respect to that security.\10\
---------------------------------------------------------------------------

    \10\ For the avoidance of doubt, the proposed rule would apply 
to a company even if the company was in compliance with the Bid 
Price Requirement at the time of its prior reverse stock split.
---------------------------------------------------------------------------

    The cumulative impact of the proposed rule change and the 2020 Rule 
would be as follows:
     A company that effected a reverse stock split of any ratio 
will be subject to delisting if it falls out of compliance with the Bid 
Price Requirement within one year of the previous reverse stock split.

[[Page 68230]]

     A company that effected one or more reverse stock split 
with a cumulative ratio of 1-for-250 or higher will be subject to 
delisting if it falls out of compliance with the Bid Price Requirement 
within two years of the reverse stock split(s).
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\12\ 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 by enhancing Nasdaq's listing requirements and limiting the 
time that a security can remain listed while non-compliant with the Bid 
Price Requirement or becoming non-compliant with the Bid Price 
Requirement within one year following a reverse stock split. In that 
regard, Nasdaq has observed that the challenges facing such companies 
generally are not temporary and may be so severe that the company is 
not likely to regain compliance within the prescribed compliance 
period. Moreover, the price concerns with these companies can be a 
leading indicator of other listing compliance concerns, and these 
companies often become subject to delisting for other reasons during 
the compliance periods.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    While listed, these securities are exempt from the ``Penny Stock 
Rules,'' \13\ which provide enhanced investor protections to prevent 
fraud and safeguard against potential market manipulation. In 
particular, the Penny Stock Rules generally require that broker-dealers 
provide a disclosure document to their customers describing the risk of 
investing in Penny Stocks and approve customer accounts for 
transactions in Penny Stocks. Nasdaq believes that an exemption from 
these Penny Stock requirements may not be appropriate for consistently 
low priced stocks and stocks that are trading below $1 after completing 
a reverse stock splits over the prior year because these securities may 
have similar characteristics to Penny Stocks. Nasdaq therefore believes 
it is appropriate to subject these securities to heightened scrutiny 
given the availability of the exemption to securities listed on Nasdaq.
---------------------------------------------------------------------------

    \13\ See Exchange Act Rules 3a51-1, 17 CFR 240.3a51-1, and 15g-1 
to 15g-100, 17 CFR 240.5g-1 et seq.
---------------------------------------------------------------------------

    Nasdaq also believes that the proposal to amend Listing Rule 
5815(a)(1)(B)(ii) to provide that a hearing request shall not stay the 
suspension of the securities from trading when the matter relates to a 
request made by a company that was afforded the second 180-day 
compliance period described in Rule 5810(c)(3)(A)(ii) and that failed 
to regain compliance with the minimum bid price requirement during that 
period is designed to protect investors and the public interest. In 
particular, this change will prevent continued trading in such 
company's securities until an independent Hearings Panel reviews the 
Delisting Determination and determines that continued trading on Nasdaq 
is appropriate.
    Finally, Nasdaq believes the proposed rule change furthers the 
objectives of Section 6(b)(7) of the Act in that it continues to 
provide a fair procedure for companies subject to these enhanced 
listing requirements. These companies can seek review of a Delisting 
Determination from a Hearings Panel, which can afford the company 
additional time to regain compliance, and can appeal the Hearings Panel 
decision to the Nasdaq Listing and Hearing Review Council.\14\ As a 
result, Nasdaq believes that the proposed rule appropriately balances 
the need for appropriate listing standards with the statutory 
requirement to protect investors and the public interest.
---------------------------------------------------------------------------

    \14\ See Listing Rules 5815 and 5820, respectively.
---------------------------------------------------------------------------

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. While Nasdaq does not believe 
there will be any impact on competition from the proposed change, any 
impact on competition that does arise will be necessary to better 
protect investors, in furtherance of a central purpose of the Act.

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

    No written comments were either solicited or received.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) by order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NASDAQ-2024-045 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-2024-045. 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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication

[[Page 68231]]

submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-NASDAQ-2024-045 and 
should be submitted on or before September 13, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-18911 Filed 8-22-24; 8:45 am]
BILLING CODE 8011-01-P
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