Rules & Regulations of the State of Tennessee
Title 0780 - Commerce and Insurance
Subtitle 0780-04 - Division of Securities
Chapter 0780-04-02 - Securities Registration and Exemptions
Section 0780-04-02-.10 - NASDAQ/NMS EXEMPTION
Universal Citation: TN Comp Rules and Regs 0780-04-02-.10
Current through September 24, 2024
(1) Exemption. By the authority delegated to the commissioner in T.C.A. §§ 48-1-103(b)(11) and 48-1-116, the following transactions are determined to be exempt from T.C.A. §§ 48-1-104 and 48-1-113:
Any sale of securities that are designated or approved for designation upon notice of issuance on the NASDAQ/NMS, any other security of the same issuer that is of senior or substantially equal rank, any security called for by subscription rights or warrants so designated or approved, or any warrant or right to purchase or subscribe to any of the foregoing.
(2) The commissioner:
(a) Shall have the authority by rule or order
to deny, suspend, or revoke the exemption created by this Rule as to a specific
issuer or category of securities; and
(b) May rescind this Rule based on a finding
that;
1. The requirements of the NASDAQ/NMS
have materially changed from those set forth in paragraph (3) of this Rule and
no longer afford equivalent investor protection; or
2. The requirements of the NASDAQ/NMS as set
forth in paragraph (3) of this Rule are not applied or enforced sufficiently to
afford protection to investors.
(3)
(a)
1. The FINRA shall require at least the
following minimum standards to be met for the designation of an issuer's
securities on the quotation system:
|
Alt. No. 1 |
Alt. No. 2 |
|
|
Net Tangible Assets |
$4,000,000 |
$12,000,000 |
|
Public Float |
500, 000 |
1,000,000 |
|
Pre-Tax Income |
750,000 |
---------------------- |
|
Net Income |
400,000 |
------------------------ |
|
Shareholders |
800/400 |
800/400 |
(The minimum number of shareholders under each alternative is eight hundred (800) for companies with five hundred thousand (500,000) to one million (1,000,000) shares publicly held, and four hundred (400) for companies with over one million (1,000,000) shares publicly held and with daily trading volume in excess of two thousand (2,000) shares per day for six (6) months.)
|
Market Value of Float |
3,000,000 |
15,000,000 |
|
Minimum Bid |
$5/share |
------------- |
|
Operating History |
-------------- |
3 years |
2.
The rules of the FINRA shall require at least two (2) authorized market makers
for each issuer.
3. For purposes of
this subparagraph (3)(a), the term "net tangible assets" is meant to include
the value of patents, copyrights, and trademarks but to exclude the value of
goodwill.
(b) The FINRA
shall require at least the following minimum corporate governance standards for
its domestic issuers;
1. Distribution of
Annual and Interim Reports.
(i) Each issuer
shall distribute to shareholders copies of an annual report containing
financial statements of the company and its subsidiaries. The report shall be
distributed to shareholders in a reasonable period of time prior to the
company's annual meeting of shareholders and shall be filed with the FINRA at
the time it is distributed to shareholders.
(ii) Each issuer which is subject to SEC Rule
13a-13 (17 C.F.R.
§240.13a-13) shall make available to
shareholders copies of quarterly reports including statements of operating
results either prior to or as soon as practicable following the company's
filing of its Form 10-Q with the SEC. If the form of such quarterly report
differs from the Form 10-Q, both the quarterly report and the Form 10-Q shall
be filed with the FINRA. The statement of operations contained in quarterly
reports shall disclose at a minimum, any substantial items of an unusual or
nonrecurrent nature, net income, and the amount of estimated federal
taxes.
(iii) Each issuer which is
not subject to SEC Rule 13a-13 (
17 C.F.R.
§240.13a-13) and which is required to
file with the SEC or another federal or state regulatory authority interim
reports relating primarily to operations and financial position shall make
available to shareholders reports which reflect the information contained in
such interim reports. Such reports shall be made available to shareholders
either before or as soon as practicable following filing with the appropriate
regulatory authority. If the form of the interim report made available to
shareholders differs from that filed with the regulatory authority, both the
report to shareholders and the report to the regulatory authority shall be
filed with the FINRA.
2.
Independent Directors. Each issuer shall maintain a minimum of two (2)
independent directors on its board of directors. For purposes of this
subparagraph (3)(b), "independent director" shall mean a person other than an
officer or employee of the issuer or its subsidiaries or any other individual
having a relationship which, in the opinion of the board of directors, would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director.
3.
Audit Committee. Each issuer shall establish and maintain an audit committee, a
majority of the members of which shall be independent directors.
4. Shareholder meetings. Each issuer shall
hold an annual meeting of shareholders and shall provide notice of such meeting
to the FINRA.
5. Quorum. Each
issuer shall provide for a quorum as specified in its bylaws for any meeting of
the holders of common stock; provided, however, that in no case shall such
quorum be less than thirty-three and one-third percent (33 1/3%) of the
outstanding shares of the issuer's common voting stock.
6. Solicitation of Proxies. Each issuer shall
solicit proxies and provide proxy statements for all meetings of shareholders
and shall provide copies of such proxy solicitation to the FINRA.
7. Conflicts of Interest. Each issuer shall
conduct an appropriate review of all related party transactions on an ongoing
basis and shall use the issuer's audit committee or a comparable body for the
review of potential conflict of interest situations where
appropriate.
8. Shareholders'
Approval Policy. Each issuer shall require shareholder approval of the issuance
of securities in connection with the following:
(i) Options plans or other special
remuneration plans for directors, officers, or key employees.
(ii) Actions resulting in a change in control
of the issuer.
(iii) The
acquisition, direct or indirect, of a business, a company, tangible or
intangible assets, or property or securities representing any such interests:
(I) From a director, officer, or substantial
security holder of the issuer (including its subsidiaries and affiliates), or
from any company or party in which one of such persons has a direct or indirect
interest; and
(II) Where the
present or potential issuance of common stock or securities convertible into
common stock could result in an increase in outstanding common shares of
twenty-five percent (25%) or more.
(c) Voting Rights.
1. The FINRA rules shall provide that no
rule, stated policy, practice, or interpretation shall permit the authorization
for designation on the NASDAQ/NMS ("authorization") or the continuance of the
authorization, of any common stock or other equity security of a domestic
issuer if, on or after September 1, 1988, the issuer issues any class of
security or takes other corporate action that would have the effect of
nullifying, restricting, or disparately reducing the per share voting rights of
holders of an outstanding class or classes of common stock of such issuer
registered pursuant to Section 12 of the 1934 Act.
2. For purposes of part (3)(c)1. of this
Rule, the following shall be presumed to have the effect of nullifying,
restricting, or disparately reducing the per share voting rights of an
outstanding class or classes of common stock:
(i) Corporate action to impose any
restriction on the voting power of shares of the common stock of the issuer
held by a beneficial owner or record holder based on the number of shares held
by such beneficial owner or record holder;
(ii) Corporate action to impose any
restriction on the voting power of shares of the common stock of the issuers
held by a beneficial owner or record holder based on the length of time such
shares have been held by such beneficial owner or record holder;
(iii) Any issuance of securities through an
exchange offer by the issuer for shares of an outstanding class of common stock
of the issuer, in which the securities issued have voting rights greater than
or less than the per share voting rights of any outstanding class of the common
stock of the issuer; or
(iv) Any
issuance of securities pursuant to a stock dividend, or any other type of
distribution of stock in which the securities issued have voting rights greater
than the per share voting rights of any outstanding class of the common stock
of the issuer.
3. For
purposes of part (3)(c)1. of this Rule, the following, standing alone, shall be
presumed not to have the effect of nullifying, restricting, or disparately
reducing the per share voting rights of holders of an outstanding class or
classes of common stock:
(i) The issuance of
securities pursuant to an initial registered public offering;
(ii) The issuance of any class of securities,
through a registered public offering, with voting rights not greater than the
per share voting rights of any outstanding class of common stock of the
issuer;
(iii) The issuance of any
class of securities to effect a bona fide merger or acquisition, with voting
rights not greater than the per share voting rights of any outstanding class of
the common stock of the issuer; or
(iv) Corporate action taken pursuant to state
law requiring a state's domestic corporation to condition the voting rights of
a beneficial or record holder of a specified threshold percentage of the
corporation's voting stock on the approval of the corporation's independent
shareholders.
4.
Definitions. For the purposes of this subparagraph (3)(c), the terms below
shall have the following meanings and the rules of the FINRA shall include such
definitions for purposes of the prohibition in part (3)(c)1. of this Rule:
(i) "Common Stock" shall include any security
of an issuer designated as common stock and any security of an issuer, however
designated, which by statute or by its terms, is common stock (e.g., a security
which entitles the holders thereof to vote generally on matters submitted to
the issuer's security holders for a vote).
(ii) "Equity security" shall include any
equity security defined as such pursuant to SEC Rule 3a11-1 ( 17 C.F.R.
§240.3a11-1).
(iii) "Domestic
issuer" shall mean an issuer that is not a "foreign private issuer" as defined
in SEC Rule 3b-4 (17 C.F.R.
§240.3b-4) .
(iv) "Security" shall include any security
defined as such pursuant to Section 3(a)(10) of the 1934 Act, but shall exclude
any class of security having a preference or priority over the issuer's common
stock as to dividends, interest payments, redemption, or payments in
liquidation, if the voting rights of such securities only become effective as a
result of specified events, not relating to an acquisition of the common stock
of the issuer, which reasonably can be expected to jeopardize the issuer's
financial ability to meet its payment obligation to the holders of that class
of securities.
(d) Maintenance Criteria. After authorization
for designation of a security on the NASDAQ/NMS, the issuer of such security
must meet the following criteria in order for such designation to continue in
effect:
1. The issuer of the security has net
tangible assets of at least:
(i) Two million
dollars ($2,000,000) if the issuer sustained losses from continuing operations
and/or net losses in two (2) of its three (3) most recent fiscal years;
or
(ii) Four million dollars
($4,000,000) if the issuer has sustained losses from continuing operations
and/or net losses in three (3) of its four (4) most recent fiscal
years;
2. There are at
least two hundred thousand (200,000) publicly held shares;
3. There are at least four hundred (400)
shareholders or at least three hundred (300) shareholders of round lots;
and
4. The aggregate market value
of publicly held shares is at least one million dollars ($1,000,000).
Authority: T.C.A. §§ 48-1-103(b)(11), 48-1-104, 48-1-113, 48-1-115, 48-1-116, §3(a)(10) and §12 of the Securities Exchange Act of 1934, 17 C.F.R. §240.3a11-1, 17 C.F.R. § 240.3b-4, and 17 C.F.R. § 240.13a-13.
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