[Federal Register Volume 67, Number 148 (Thursday, August 1, 2002)]
[Notices]
[Pages 49971-49972]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-19455]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46270; File No. SR-NASD-2002-78]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the National Association of Securities Dealers, Inc. Clarifying That 
Failure to Provide Information to Nasdaq or Making Misrepresentations 
to Nasdaq May Result in Delisting From Nasdaq

July 26, 2002.
    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 June 11, 2002, 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. Nasdaq 
submitted Amendment No. 1 to the proposed rule change on July 12, 
2002.\3\ Nasdaq filed the proposed rule change, as amended, pursuant to 
section 19(b)(3)(A) of the Act,\4\ and Rule 19b-4(f)(1) thereunder,\5\ 
which renders the proposal effective upon filing with the Commission. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ This notice, representing Amendment No. 1, replaces the 
original filing in its entirety. In Amendment No. 1, the Exchange 
designated the proposed rule change as one that constitutes a stated 
policy, practice or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule pursuant to Rule 
19b-4(f)(1) under the Act. 17 CFR 240.19b-4(f)(1). See letter from 
Mary M. Dunbar, Vice President and Deputy General Counsel, Nasdaq, 
to Katherine A. England, Assistant Director, Division of Market 
Regulation, Commission, dated July 11, 2002 (``Amendment No. 1'').
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to amend Nasdaq Rule 4330(c) to clarify that 
issuers may be delisted for failing to provide information to Nasdaq or 
for making material misrepresentations to Nasdaq. The text of the 
proposed rule change is below; proposed new language is italicized:
* * * * *
    Rule 4330. Suspension or Termination of Inclusion of a Security and 
Exceptions to Inclusion Criteria.
    (a)-(b) No change
    (c) Nasdaq may request any additional information or documentation, 
public or non-public, deemed necessary to make a determination 
regarding a security's initial or continued inclusion, including, but 
not limited to, any material provided to or received from the 
Commission or other appropriate regulatory authority. Information 
requested pursuant to this subparagraph shall be submitted within a 
reasonable period. An issuer may be delisted if it fails to provide 
such information. An issuer may also be delisted if any communication 
to Nasdaq contains a material misrepresentation or omits material 
information necessary to make the communication to Nasdaq not 
misleading.
* * * * *

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
    As a result of recent events, Nasdaq has focused on ways to improve 
the corporate governance of listed companies. After considering these 
issues, Nasdaq identified several rule changes that could be instituted 
in the short term and identified these changes in an April 11, 2002, 
letter to Commission Chairman Harvey Pitt. While not specifically 
referenced in the letter to Chairman Pitt, Nasdaq also proposes certain 
other changes to strengthen corporate governance standards. 
Specifically, Nasdaq proposes to clarify that an issuer can be delisted 
for misrepresenting material information to Nasdaq. NASD rules do not 
explicitly state that an issuer that makes a material misrepresentation 
to Nasdaq, omits necessary material information in a communication with 
Nasdaq, or otherwise fails to provide requested material information, 
may be delisted. While Nasdaq believes that existing rules allow for 
delisting in these situations, Nasdaq proposes to modify the rules to 
clarify this.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A(b) of the Act,\6\ in general, and 
furthers the objectives of section 15A(b)(6),\7\ in particular, because 
it is 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

[[Page 49972]]

and a national market system, and, in general, to protect investors and 
the public interest.
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    \6\ 15 U.S.C. 78o-3(b).
    \7\ 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, as amended.

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

    Because the foregoing proposed rule change constitutes a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the self-
regulatory organization, the rule change has become effective pursuant 
to Section 19(b)(3)(A)(i) of the Act \8\ and Rule 19b-4(f)(1) 
thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(i).
    \9\ 17 CFR 240.19b-4(f)(1).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.\10\
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    \10\ The proposed rule change became effective on July 12, 2002, 
the date on which Amendment No. 1 was filed and, therefore, the 60 
day abrogation period began on July 12, 2002.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 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 
number SR-NASD-2002-78 should be submitted by August 22, 2002.

    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. 02-19455 Filed 7-31-02; 8:45 am]
BILLING CODE 8010-01-P