[Federal Register Volume 65, Number 124 (Tuesday, June 27, 2000)]
[Notices]
[Pages 39642-39644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-16209]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42970; File No. SR-NASD-00-31]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by National Association of Securities Dealers, Inc. to Apply 
Nasdaq's Recently Amended Independent Director and Audit Committee 
Listing Requirements to Limited Partnerships

June 21, 2000.
    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 May 26, 2000, 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 
and Exchange Commission (``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by Nasdaq. 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.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Nasdaq has filed with the Commission a proposed rule change to 
apply its recently amended independent director and audit committee 
listing requirements to limited partnerships. Below is the text of the 
proposed rule change. Proposed new language is italicized and proposed 
deletions are in [brackets].
* * * * *

[[Page 39643]]

Rule 4470. Non-Quantitative Designation Criteria for Issuers That 
Are Limited Partnerships

    (a) No change.
    (b) No change.
    (c) Corporate General Partner/Independent Directors.
    Each [NNM] issuer that is a limited partnership shall maintain a 
corporate general partner or co-general partner, which shall have the 
authority to manage the day-to-day affairs of the partnership. Such 
corporate general or co-partner shall maintain [two independent 
directors on its board of directors] a sufficient number of independent 
director son its board of directors to satisfy the audit committee 
requirements set forth in Rule 4460(d)(2). [An issuer that is a limited 
partnership may be designated for inclusion in the Nasdaq National 
market upon demonstrating that it has one independent director and 
undertaking to elect a second such director within 12 month of 
designation. For purposes of this section, ``independent director'' 
shall mean a person other than an officer or employee of the company 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.]
    (d) Audit Committee.
    The corporate general partner or co-general partner of each [NNM] 
issuer that is a limited partnership [shall establish and maintain an 
Audit Committee, a majority of the members of which shall be 
independent directors.] must satisfy the audit committee requirements 
set forth in Rule 4460(d).
    (e)-(i) No change.

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
    In 1993, Nasdaq established corporate governance standards, 
including independent director and audit committee requirements, for 
limited partnerships that were similar to those for other issuers. Last 
year, the Commission approved amendments to the independent director 
and audit committee listing requirements for corporations quoted on 
Nasdaq.\3\ Nasdaq believes that although there are few limited 
partnerships currently quoted on Nasdaq, the new independent director 
and audit committee requirements should also be applied to limited 
partnerships to provide investors with the same protections enjoyed by 
the shareholders of other issuers. Therefore, Nasdaq is proposing this 
rule change to extend the recent amendments to its independent director 
and audit committee listing standards for corporations to limited 
partnerships.
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    \3\ See Securities Exchange Act Release No. 42231 (December 14, 
1999), 64 FR 71523 (December 21, 1999).
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    Implementation. In order to minimize disruption to existing limited 
partnership audit committees, to permit current audit committee members 
to serve out their terms, and to allow adequate time for the 
recruitment of the requisite members, Nasdaq proposes to provide 
limited partnerships eighteen months after the proposed rule change is 
approved by the Commission to meet the audit committee structure and 
membership requirements.
    Additionally, Nasdaq proposes that limited partnerships listed on 
the effective date of the rule be provided within six months following 
the date the proposed rule change is approved by the Commission to 
adopt a formal written audit committee charter.
    Further, for limited partnerships that applied for listing prior to 
the effective date of the rule, Nasdaq proposes that they be able to 
qualify for listing under the listing standards in force at the time of 
their application, and receive the same grace periods provided to 
current limited partnerships. Also, in order to avoid prejudicing 
limited partnerships that transfer to Nasdaq from the American Stock 
Exchange LLC and the New York Stock Exchange, it is proposed that these 
limited partnerships be afforded the same grace periods they would have 
received under their previous market's implementation schedule.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) of the Act \4\ because the proposal 
is designed to prevent fraudulent and manipulative acts and practices, 
to protect investors and the public interest. As noted above, Nasdaq's 
proposed rule change is aimed at improving the effectiveness of audit 
committees of limited partnerships quoted on Nasdaq, which, Nasdaq 
believes, is consistent with these goals.
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    \4\ 15 U.S.C. 78o(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

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 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 self-regulatory organization consents, the Commission will:
    (A) by order approve 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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

[[Page 39644]]

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 in 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-00-31 and should be submitted by July 18, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-16209 Filed 6-26-00; 8:45 am]
BILLING CODE 8010-01-M