[Federal Register Volume 63, Number 242 (Thursday, December 17, 1998)]
[Notices]
[Pages 69701-69703]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33363]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40771; File No. SR-NASD-98-79]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. Relating 
to Issuer Responsibilities When Using the Internet; Updating 
MarketWatch Contact Information and Other Matters

December 10, 1998.
    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 October 21, 1998, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association''), through its wholly-owned 
subsidiary, the Nasdaq Stock Market, Inc. (``Nasdaq'') filed with the 
Securities Exchange Commission (``SEC'' or ``Commission'') the proposed 
rule change as described in Items I, II, and III below, which Items 
have been prepared by Nasdaq.\3\ The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 was received by the Commission on December 
3, 1998, the substance of which is incorporated into this notice. 
Letter from Andrew S. Margolin, Assistant General Counsel, Nasdaq, 
to Katherine A. England, Division of Market Regulation 
(``Division''), Commission, dated December 2, 1998 (``Amendment No. 
1''). Amendment No. 2 was received by the Commission on December 10, 
1998, the substance of which is incorporated into this notice. 
Letter from Andrew S. Margolin, Assistant General Counsel, Nasdaq, 
to Katherine A. England, Division, Commission, dated December 9, 
1998 (``Amendment No. 2'').
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Nasdaq is proposing to amend NASD Rule IM-4120-1 with respect to 
the use of the Internet for dissemination of issuer disclosures. below 
is the text of the proposed rule change. Proposed new language is in 
italics; proposed deletions are in [brackets].

4120. Trading Halts

    (a) No Change
    (b) Procedure for Initiating a Trading Halt
    (1) Nasdaq issuers are required to notify Nasdaq of the release of 
any material news prior to the release of such information to 
appropriate news services[the press] as required by Rule 4310(c)(16) 
and 4320[(d)(15)](e)(14).
    (b)(2) through (5) No Change
    Footnote to 4120(b)(2):
    [The current telephone number is 1-800-537-3929, (301) 590-6411, or 
from 6 p.m. to 8 a.m. Eastern Time, (301) 590-6413. The Stock Watch fax 
number is (301) 590-6482.] Notification may be provided to the 
MarketWatch Department by telephone 1-800-537-3929 and (301) 590-6411. 
Between 6 p.m. and 8 a.m. Eastern Time, voice mail messages may be left 
on either number. The fax number is (301) 590-6482.
* * * * *

IM-4120-1. Disclosure of Material Information

    Rules 4310(c)(16) and 4320[(d)(15)](e)(14) require that, except in 
unusual circumstances, Nasdaq issuers disclose promptly to the public 
through appropriate[the] news [media]services any material information 
which would reasonably be expected to affect the value of their 
securities or influence investors' decisions and that Nasdaq issuers 
notify Nasdaq of the release of any such information prior to its 
release to the public through the news [media]services. Nasdaq 
recommends that Nasdaq issuers provide such notification at least ten 
minutes before such release.* Under unusual circumstances issuers may 
not be required to make public disclosure of material events; for 
example, where it is possible to maintain confidentiality of those 
events and immediate public disclosure would prejudice the ability of 
the company to pursue its legitimate corporate objectives. However, 
Nasdaq issuers remain obligated to disclose this information to Nasdaq 
upon request pursuant to Rules 4310(c)15) or 4320[(d)(14)](e)(13).
    Whenever unusual market activity takes place in a Nasdaq issuer's 
securities, the issuer normally should determine whether there is 
material information or news which should be disclosed. If rumors or 
unusual market activity indicate that information on impending 
developments has become known to the investing public, or if 
information from a source other than the issuer becomes known to the 
investing public, a clear announcement may be required as to the state 
of negotiations or development of issuer plans. Such an announcement 
may be required, even though the issuer may not have previously been 
advised of such information or the matter has not yet been presented to 
the issuer's Board of Directors for consideration. It may also be 
appropriate, in certain circumstances, to publicly deny false or 
inaccurate rumors which are likely to

[[Page 69702]]

have, or have had, as effect on the trading in its securities or would 
likely have an influence on investment decisions.
* * * * *

Use of the Internet In the Disclosure of Material Information

    While Nasdaq requires that its listed issuers disseminate material 
press releases to one of the traditional news services, such as a major 
news wire, Nasdaq recognizes the increased utilization of the Internet 
as a vehicle for additional news dissemination. The Internet is a 
valuable disclosure resource that can enhance the orderly dissemination 
of material information for all shareholders and market participants.
    Issuers can and should provide shareholders direct access to 
corporate disclosures via their Internet home pages and web sites.
    To ensure a level playing field for all investors in Nasdaq 
companies, however, this policy on disclosure of corporate information 
requires that the use of the Internet to disseminate material press 
releases is appropriate provided the information is not made available 
over the Internet before the same information is transmitted to, and 
received by, traditional news services and such news services are free 
from any restrictions as to its release at that time (i.e., the 
information is for ``immediate release'' or is no longer subject to 
embargo). Issuers must still notify Nasdaq at least ten minutes prior 
to the release of any information that would reasonably be expected to 
affect the value of securities or influence investors' decisions, as 
indicated in this policy.
    Footnote to IM-4120-1:
     [Notification may be provided to the MarketWatch 
Department by telephone 1-800-537-3929, (301) 590-6411, or from 6 p.m. 
to 8 a.m. Eastern Time, (301) 590-6413. Information communicated orally 
should be confirmed promptly in writing. The StockWatch fax number is 
(301) 590-6482.]
    Notification may be provided to the MarketWatch Department by 
telephone 1-800-537-3929 and (301) 590-6411. Between 6 p.m. and 8 a.m. 
Eastern Time, voice mail messages may be left on either number. 
Information communicated orally should be confirmed promptly in 
writing. The fax number is (301) 590-6482.
    The MarketWatch Department will provide a list of suggested news 
services or confirm use of a particular service, by telephone at 1-800-
537-3929 or (301) 590-6411. Between 6 p.m. and 8 a.m. Eastern Time, 
voice mail messages may be left on either number.
* * * * *

4310. Qualifications Requirements for Domestic and Canadian 
Securities

    Footnote to 4310(c)(16):
    This notice shall be made to Nasdaq's MarketWatch Department at 
9513 Key West Avenue, Rockville, Maryland 20850-3389. The telephone 
numbers [is] are 1-800-537-3929[,] and (301) 590-6511.[, or from] 
Between 6 p.m. [to] and 8 a.m. Eastern Time, [(301) 590-6413] voice 
mail messages may be left on either number. The fax number is (301) 
590-6482.

4320. Qualification Requirements for Non-Canadian Foreign 
Securities and American Depositary Receipts

    Footnote to 4320(e)(14):
    This notice shall be made to Nasdaq's MarketWatch Department at 
9513 Key West Avenue, Rockville, Maryland 20850-3389. The telephone 
numbers [is] are 1-800-537-3929[,] and (301) 590-6511.[, or from] 
Between 6 p.m. [to] and 8 a.m. Eastern Time, [(301) 590-6413] voice 
mail messages may be left on either number. The fax number is (301) 
590-6482.
* * * * *

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

    In its filing with the Commission, Nasdaq 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. Nasdaq 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
    Increased use of the Internet to provide access to corporate 
information for shareholders has resulted in questions regarding the 
timing of news releases over the Internet and the use of issuers' 
Internet sites as replacements for traditional dissemination of news to 
the media. While Nasdaq believes that it is generally in the public 
interest to encourage widespread dissemination of information to 
investors through the Internet, Nasdaq also believes that it is 
important to maintain a level playing field for all investors, 
including those who do not have Internet access or who may not 
generally rely on the Internet as their primary source of material 
corporate news. Consequently, Nasdaq is not proposing to alter its 
traditional requirement that news be disseminated through traditional 
news services. These include Dow Jones News Service, Reuters, Bloomberg 
Business News, Business Wire, PR Newswire, The Wall Street Journal, and 
The New York Times.\4\
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    \4\ For a complete list of appropriate news services, contact 
the MarketWatch Department by telephone 1-800-537-3929 or (301) 590-
6411. Between 6 p.m. and 8 p.m. Eastern Time, voice mail messages 
may be left on either number.
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    Accordingly, Nasdaq is proposing to amend NASD Interpretation IM-
4120-1 to state that Nasdaq fully supports companies' use of Internet 
home pages to disseminate information to shareholders, but that the 
Internet must not be a substitution for the dissemination of news 
through traditional news services. In the interests of maintaining a 
level playing field for all investors and to avoid situations of 
potential selective disclosure, the Nasdaq policy will be amended to 
indicate that dissemination of news over the Internet is appropriate 
provided it is not made available over the Internet before the same 
information is transmitted to, and received by, the traditional news 
services. Furthermore, the amended policy will reiterate that issuers 
must still notify Nasdaq at least ten minutes prior to any release of 
material information, consistent with the existing policy.
    In addition, Nasdaq is making technical corrections to several 
cross references contained in NASD Rule, 4120 and IM-4120-1, as well as 
eliminating several footnote references to an outdated phone number 
used to contact Market Watch, which are contained in NASD Rules 4120, 
4310, and 4320.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act \5\ in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principals of trade, and in general, to 
protect investors and the public interest. The amended policy on 
corporate disclosure facilitates widespread public availability of 
issuers information while ensuring a level playing field regarding its 
dissemination.
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    \5\ 15 U.S.C. 78o-3(b)(6).

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[[Page 69703]]

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

    Nasdaq does not believe that the proposed rule change will impose 
any inappropriate burden on competition.

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

    Written comments were neither solicited nor received.

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

    Within 35 days of the 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 self-regulatory organization consents, the Commission will:
    (A) by order approve the 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 proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 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 inspection and copying at the Commission's 
Public Reference Room. Copies of such filing will also be available for 
inspection and copying at the principal office of the NASD. All 
submissions should refer to File No. SR-NASD-98-79 and should be 
submitted by January 7, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-33363 Filed 12-16-98; 8:45 am]
BILLING CODE 8010-01-M