[Federal Register Volume 67, Number 160 (Monday, August 19, 2002)]
[Notices]
[Pages 53821-53822]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-20975]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46345; File No. SR-NASD-2002-105]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. to Increase the Term of Office for Members of 
the Nasdaq Listing and Hearing Review Council From Two to Three Years, 
and to Increase the Number of Nasdaq Listing and Hearing Review Council 
Classes

August 13, 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 August 2, 2002, the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association''), 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 filed the proposal pursuant to Section 19(b)(3)(A) of the 
Act,\3\ and Rule 19b-4(f)(3) thereunder \4\ as being concerned solely 
with the administration of the self-regulatory organization, which 
renders the proposal effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(3).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to increase the term of office for members of the 
Nasdaq Listing and Hearing Review Council (``Listing Council'') from 
two to three years, and to increase the number of Listing Council 
classes from two to three. The text of the proposed rule change is 
below. Proposed new language is in italics. Proposed deleted text is in 
brackets.
BY-LAWS OF THE NASDAQ STOCK MARKET, INC.
* * * * *
ARTICLE V
NASDAQ LISTING AND HEARING REVIEW COUNCIL
* * * * *
Term of Office
    Sec. 5.4 (a) Beginning in January 2003, [E]except as otherwise 
provided in this Article, each Nasdaq Listing and Hearing Review 
Council member shall hold office for a term of three [two] years or 
until a successor is duly appointed and qualified, except in the event 
of earlier termination from office by reason of death, resignation, 
removal, disqualification, or other reason. Prior to January 2003, the 
term of office for each Nasdaq Listing and Hearing Review Council 
member shall be two years.
    (b) The Nasdaq Listing and Hearing Review Council shall be divided 
into three [two] classes. The term of office of those of the first 
class shall expire in January 2004 [1999], [and] the term of office of 
those of the second class shall expire in January 2005, [one year 
thereafter] and the term of office of those of the third class shall 
expire in January 2006. Beginning in January 2003 [1999], members shall 
be appointed for a term of three [two] years to replace those whose 
terms expire.
    (c) [Beginning in 1999,] [n]No member may serve more than two 
consecutive terms, except that if a member is appointed to fill a term 
of less than one year, such member may serve up to two consecutive 
terms following the expiration of such member's initial term.
* * * * *

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
    Nasdaq proposes to increase the term of office for members of the 
Listing Council, and to increase the number of Listing Council classes. 
The Listing Council, which consists of between eight and 18 members, 
considers and makes recommendations to the Nasdaq Board on policy and 
rule changes relating to issuer listings. In addition, the Listing 
Council, to the extent of its delegated authority, functions as the 
appellate forum for staff adjudicated determinations related to 
compliance with applicable listing requirements.
    Currently, members of the Listing Council hold office for a term of 
two years and may serve no more than two consecutive terms. Nasdaq 
proposes to extend members' terms to three years in order to provide 
greater continuity to the Listing Council. Specifically, the increase 
in the length of members' terms will allow the Listing Council to be 
divided into three classes rather than the current two classes. By 
dividing the Listing Council into three classes, the number of members 
that must be selected and trained each time a new class is appointed 
will be significantly reduced.
    Nasdaq proposes to implement the proposed rule change by extending 
the second term of most current Listing Council members from two to 
three years. Currently, the Listing Council consists of 18 members. The 
first class is composed of eight members. Five of these members are 
currently serving their second consecutive term, which is scheduled to 
expire in January 2003 (``Group 1''). The remaining three members of 
the first class are currently

[[Page 53822]]

serving their first term and their second term is scheduled to expire 
in January 2005 (``Group 2''). The second class is also composed of 
eight members. All of the members of the second class are serving their 
second consecutive term, which is scheduled to expire in January 2004 
(``Group 3''). The remaining two members of the Listing Council were 
appointed by the Board of Directors of Nasdaq earlier this year, one in 
May 2002 and the other in July 2002. Pursuant to Section 5.4(c) of the 
By-Laws of The Nasdaq Stock Market, these members' initial term will 
expire in January 2003 and they will then be eligible to serve two 
consecutive terms.
    By extending the second term of most current members to three 
years, Nasdaq will be able to efficiently divide the Listing Council 
into three classes. Under this plan, the new first class will be 
composed of Group 1 and the second term of the members in this class 
will expire in January 2004. The new second class will be composed of 
Group 3 and the second term of the members in this class will expire in 
January 2005. Lastly, the new third class will be composed of Group 2 
and the second term of the members in this class will expire in January 
2006. The two remaining Listing Council members that were appointed 
earlier this year will be part of the new third class and they will be 
eligible to serve two three-year terms. Thus, these members' first term 
will expire in January 2006 and their second term will expire in 
January 2009.\5\
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    \5\ Nasdaq considers these two members to be part of the new 
third class as their service on the Listing Council will end at the 
expiration of their first term in January 2006 unless they are 
reappointed for a second term.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\6\ in general and with 
Section 15A(b)(6) of the Act,\7\ in particular, in that the proposal is 
designed to prevent fraudulent and manipulative acts and practices, 
and, in general, to protect investors and the public interest. 
Specifically, Nasdaq believes the proposed rule change will provide 
greater continuity to the Listing Council, thereby allowing it to more 
efficiently address listing and policy matters that often involve 
investor protection issues.
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    \6\ 15 U.S.C. 78o-3.
    \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

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \8\ and subparagraph (f)(3) of Rule 19b-4 
thereunder,\9\ because it is concerned solely with the administration 
of the Association. At any time within 60 days of the filing of the 
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.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(3).
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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 proposal 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 Association. All 
submissions should refer to file number SR-NASD-2002-105 and should be 
submitted by September 9, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-20975 Filed 8-16-02; 8:45 am]
BILLING CODE 8010-01-P