[Federal Register Volume 66, Number 70 (Wednesday, April 11, 2001)]
[Notices]
[Pages 18837-18839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8905]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44153; File No. SR-NASD-01-17]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc., To 
Revise the Fees Associated With Appeals of Nasdaq Listing 
Determinations

April 5, 2001.
    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 March 13, 2001, the National Association of Securities Dealers, Inc. 
(``NASD''), through its 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 filed a proposed rule change to revise the fees associated 
with appeals of Nasdaq listing determinations. Below is the text of the 
proposed rule change. Proposed new language is in italics; proposed 
deletions are in brackets.
* * * * *

Rule 4820. Request for Hearing

    (a) No change
    (b) No change
    (c) Within 15 calendar days of the date of the Staff 
Determination, but in no event after the time of the hearing, the 
issuer must submit a hearing fee to The Nasdaq Stock Market, Inc., 
to cover the cost of holding the hearing, as follows:
    (1) where consideration is on the basis of an written submission 
from the issuer, $[1,400] 4,000; or
    (2) where consideration is on the basis of an oral hearing, 
whether in person or by telephone, $[2,300]5,000.

Rule 4840. Review by the Nasdaq Listing and Hearing Review Council

    (a) No change
    (b) The issuer may initiate the Listing Council's review of any 
Panel Decision by making a written request within 15 calendar days 
of the date of the decision. Requests for review should be addressed 
to the Listing Council in care of the Nasdaq Office of General 
Counsel. The request will not operate as a stay of the Panel 
Decision. Also

[[Page 18838]]

within 15 calendar days of the date of the Panel Decision, the 
issuer must submit a fee of $[1,400]4,000 to The Nasdaq Stock 
Market, Inc., to cover the cost of the review. Upon receipt of the 
request for review and the applicable fee, the Nasdaq Office of 
General Counsel will make an acknowledgment of the issuer's request 
stating the deadline for the issuer to provide any written 
submissions.
    (c)-(e) No change
* * * * *

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

    In his 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

I. Purpose
    Determinations by the Listing Qualifications Department or the 
Listing Investigations Department to limit or prohibit the initial or 
continued listing of an issuer's securities may be appealed by the 
issuer to the Listing Qualification Panel (the ``Panel'') and 
thereafter to the Nasdaq Listing and Hearing Review Council (the 
``Listing Council''). The proposed rule change revises the current fee 
schedules for issuer requests for the review of listing determinations 
to both the Panel and the Listing Council to cover the costs associated 
with such review.
    Currently, the fee for an appeal to the Panel based on a written 
submission from the issuer is $1,400, and the fee for an oral hearing 
before the Panel is $2,300. In addition, the fee for an appeal to the 
Listing Council is $1,400.\3\ Nasdaq proposes to change the fee for an 
appeal to the Panel based on a written submission from the issuer to 
$4,000 and the fee for an oral hearing before the Panel to $5,000. In 
addition, Nasdaq proposes to change the fee for an appeal to the 
Listing Council to $4,000.
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    \3\ Pursuant to Marketplace Rule 4840(d), appeals to the Listing 
Council are based only on the written record unless the Listing 
Council exercises its discretion to hold an oral hearing. There is 
no additional fee for an oral hearing before the Listing Council.
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    The fees associated with appeals to the Panel were last revised in 
1996.\4\ Since that time, there has been an increase in the various 
costs associated with the review process. In particular, in 1999, 
Nasdaq expanded the review process, in part in response to the 
Commission's findings, which required changes in the process of reviews 
and an increase in the amount of time spent by Nasdaq staff members 
dedicated to the review process.\5\ Further, Nasdaq has identified 
other expenses related to the review process that are not covered by 
the current hearing fees.\6\
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    \4\ See Securities Exchange Act Release No. 37088 (April 9, 
1996), 61 FR 16662 (April 16, 1996). In 1999, a $1,400 fee for 
appeals to the Listing Council was established, which matched the 
fee for appeals to the Panel based only on the written record. See 
Securities Exchange Act Release No. 41367 (May 4, 1999), 64 FR 25942 
(May 13, 1999).
    \5\ See Securities Exchange Act Release No. 41367 (May 4, 1999), 
64 FR 25942 (May 13, 1999).
    \6\ Nasdaq represents that the other expenses relating to the 
review process that are not covered by the current hearing fees 
include: overhead, including telephones, supplies, depreciation and 
occupancy, computer system support, listing qualifications retention 
analyst and manager review, and a stipend for Panel and Listing 
Council members. Telephone conversation between John D. Nachmann, 
Senior Attorney, Office of General Counsel, Nasdaq, and Lisa Jones, 
Attorney, Division of Market Regulation, Commission (March 30, 
2001).
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    The proposed fee for an appeal to the Panel includes all costs of 
the Office of Listing Qualifications hearings attributable to the 
processing of hearing requests and the associated expenses of the 
Panel.\7\ In addition, the proposed fee for an appeal to the Panel 
includes a large portion of the expenses associated with the Office of 
Appeals and Review,\8\ and the Listing Council. The proposed fee for an 
appeal to the Listing Council under Marketplace Rule 4840(b) will cover 
the remainder of the expenses of the Office of Appeals and Review and 
the Listing Council, as well as the Office of General Counsel's time 
directly related to the appeals process.\9\
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    \7\ The additional variable fee allocated to issuers who request 
oral hearings before the Panel is designed to recover the additional 
costs associated with such hearings; specifically, travel expenses 
for members of the Panel and court reporter time to maintain a 
transcript of these hearings.
    \8\ Nasdaq has filed a proposed rule change, SR-NASD-01-02, with 
the Commission pursuant to Section 19(b)(3), subparagraph (f) of the 
Act, and Rule 19b-4 thereunder that transfers certain 
responsibilities of the Nasdaq Office of General Counsel regarding 
the review process to the Office of Appeals and Review, a new unit 
in the Nasdaq's Listing Qualifications Department. The Office of 
Appeals and Review will receive requests for review from issuers and 
will keep records of proceedings.
    \9\ The fees proposed in this proposed rule change are designed 
to recover only the direct costs associated with the review process 
and do not include various indirect overhead costs that have been 
identified by Nasdaq as Senior Management, Finance, Human Resources, 
Administrative Services, Legal (excluding unrelated litigation and 
international expenses), Economic Research, NasTech and Strategic 
Development.
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    Nasdaq believes that the allocation of a large portion of the 
proposed fees associated with the Office of Appeals and Review and the 
Listing Council is appropriate because all decisions of the Panel are 
subject to call for review, and the Office of Appeals and Review 
supports the Listing Council in connection with its call for review 
function. Furthermore, the Listing Council sets policy applicable to 
all Panel decisions. For these reasons and in order to ensure that the 
cost for review by the Listing Council will not be so high as to 
effectively foreclose the opportunity for review by the Listing 
Council, Nasdaq believes it is appropriate to allocate a large portion 
of the expenses associated with the Office of Appeals and Review and 
the Listing Council to all issuers who request an appeal to the Panel.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A(b)(5) \10\ and section 15A(b)(6) \11\ of 
the Act. The proposed rule change is consistent with section 15A(b)(5) 
in that it provides for the equitable allocation of reasonable dues, 
fees, and other charges among issuers using the Nasdaq system. 
Furthermore, the proposed fees are designed to ensure that the review 
process is revenue neutral and reflects the costs incurred by Nasdaq to 
process issuer requests for review. The proposed rule change is 
consistent with section 15A(b)(6) in that it is designed to prevent 
fraudulent and manipulative acts and practices as well as to protect 
investors and the public interest by covering the costs associated with 
ensuring that only qualified issuers are allowed to list or remain 
listed on Nasdaq.
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    \10\ 15 U.S.C. 78o-3(b)(5).
    \11\ 15 U.S.C. 78o-3(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

    Nasdaq has neither solicited nor received written comments on the 
proposed rule change.

[[Page 18839]]

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. 
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 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 the File No. SR-NASD-01-17 and 
should be submitted by May 2, 2001.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-2(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 01-8905 Filed 4-10-01; 8:45 am]
BILLING CODE 8010-01-M