[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
[[Page 5332]]
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