[Federal Register Volume 64, Number 22 (Wednesday, February 3, 1999)]
[Notices]
[Pages 5331-5332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2536]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40988; File No. SR-NASD-98-79]


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

January 28, 1999.
    On October 21, 1998, the National Association of Securities 
Dealers, Inc. (``NASD''), through its wholly-owned subsidiary, the 
Nasdaq Stock Market, Inc. (``Nasdaq'') submitted to the Securities 
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 amend NASD Rule IM-4120-1 with 
respect to the use of the Internet for dissemination of issuer 
disclosures.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change appeared in the Federal Register on 
December 17, 1998.\3\ The Commission received no comments concerning 
the proposed rule change. This Order approves the proposed rule change 
for the reasons discussed below.
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    \3\ Securities Exchange Act Rel. No. 40771 (December 10, 1998), 
63 FR 56055.
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I. Description of Proposal

    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. 
While Nasdaq believes that it is generally in the public interest to 
encourage widespread dissemination of information to investors through 
the Internet, it also believes that it must 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 proposes 
permitting issuers to publicize news over the Internet, but only as a 
supplement to its ongoing 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\ A complete list of appropriate news services is available 
from Nasdaq's Market Watch Department by telephone 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.
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    Accordingly, Nasdaq is proposing to amend NASD Interpretation IM-
4120-1 to state that it fully supports companies' use of Internet home 
pages to disseminate information to shareholders, but that the Internet 
must be a substitute 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 as long as 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 to traditional news services or over the Internet, 
consistent with the existing policy.\5\
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    \5\ In addition, this Order also approves several technical 
corrections to 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 MarketWatch, which are 
contained in NASD Rules 4120, 4310, and 4320.
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II. Discussion

    Upon review, the Commission finds that the proposed rule change is 
consistent with the provisions of the Act and the rules and regulations 
thereunder applicable to a registered securities association. In 
particular, the Commission believes the proposal is consistent with 
Sections 15A(b)(6) \6\ and 11A(a)(1)(B) \7\ of the Act.\8\ Section 
15A(b)(6) requires that the rules of an association 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 national market system, 
and, in general, to protect investors and the public interest.\9\ 
Section 11A(a)(1)(B) recognizes that new data processing and 
communications techniques create the opportunity for more efficient and 
effective market operations. Increasing the available outlets through 
which material information is circulated, as proposed, increases market 
transparency and furthers the goals of this section.
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    \6\ 15 U.S.C. 78o-3(b)(6).
    \7\ 15 U.S.C. 78k-1.
    \8\ In reviewing this proposal, the Commission has considered 
the proposal's impact on efficiency, competition and capital 
formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78o-3(b)(6).
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    A free and open national market system requires the timely and 
thorough dissemination of information to market participants. Since its 
advent, the Internet's popularity has grown rapidly. The Commission 
believes that the Internet is a viable method to disseminate 
information to market participants. With its relatively low cost of 
operation, easy accessibility, and potential for rapid dissemination, 
it represents an effective and timely method for issuers to disseminate 
information to investors and the general public. The Commission agrees 
with Nasdaq that the Internet is an acceptable method for issuers to 
communicate with investors; its use to publicize material information 
should promote rapid and wide-spread dissemination of Company 
information, specifically enhancing the openness and fairness of the 
national market system generally.
    The Commission further notes that the proposed rule change should 
adequately protect investors who rely on traditional news services to 
obtain information on issuers. As proposed, issuers who are required to 
disseminate information under NASD rules must use Nasdaq-approved 
traditional news services regardless of whether the issuers post the 
information on the Internet. This should protect investors who do not 
have Internet access or who still rely on traditional news services for 
their corporate news. In addition, the proposal provides that material 
news may not be released on the Internet prior to its receipt by 
traditional news services thereby helping to ensure that material news 
is not selectively disseminated.

III. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the

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proposed rule change (SR-NASD-98-79) is approved.

    \10\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-2536 Filed 2-2-99; 8:45am]
BILLING CODE 8010-01-M