[Federal Register Volume 67, Number 232 (Tuesday, December 3, 2002)]
[Notices]
[Pages 72011-72012]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30538]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46901; File No. SR-NASD-2002-85]


Self-Regulatory Organizations; Order Granting Approval of 
Proposed Rule Change by the National Association of Securities Dealers, 
Inc. Relating to Issuer Disclosure of Material Information

November 25, 2002.

I. Introduction

    On June 26, 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''), 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 modify Nasdaq's rules pertaining to issuer 
disclosure of material information. The proposed rule change was 
published for notice and comment in the Federal Register on August 7, 
2002.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 46288 (July 31, 
2002), 67 FR 51306.
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    The Commission received one comment on the proposed rule change.\4\ 
On October 16, 2002, Nasdaq filed a letter in response to comments on 
the proposal.\5\ This order approves the proposed rule change.
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    \4\ See August 26, 2002 letter from Charles H. Morin, Chief 
Executive Officer, PR Newswire, to Margaret H. McFarland, Deputy 
Secretary, Commission (``PR Newswire Letter'').
    \5\ See October 15, 2002 letter from John D. Nachmann, Senior 
Attorney, Nasdaq, to Katherine A. England, Assistant Director, 
Division of Market Regulation, Commission (``Nasdaq Response 
Letter'').
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II. Summary of Comments

The PR Newswire Letter

    In its comment letter, PR Newswire (``Commenter'') submits that the 
filing of a Form 8-K via EDGAR, without more, does not achieve the goal 
of providing

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investors with timely access to material corporate information.\6\ 
According to the Commenter, when an issuer files a Form 8-K with the 
Commission, investors will receive the information only if investors 
(1) know when to anticipate the disclosure; (2) know where to find the 
information; and (3) have access to the Commission's Web site or a site 
carrying EDGAR content.\7\ The Commenter believes that allowing only 
the filing of a Form 8-K in satisfaction of disclosure requirements 
would reduce the possible dissemination of information to the investing 
public.\8\
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    \6\ PR Newswire Letter at p.3.
    \7\ Id.
    \8\ Id. at p.4.
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    The Commenter suggests that requiring the filing of a Form 8-K in 
tandem with a news release distributed by a commercial newswire service 
and posted on an issuer's Web site will ``fully address the desired 
goals.''\9\ Additionally, the Commenter believes that the scope of 
dissemination of such a press release should ``correspond to 
dissemination that the issuer normally effects with respect to its 
results of operations.''\10\ The Commenter suggests that disclosure 
through a press release should require dissemination of the entire text 
of the press release, to avoid providing limited and selective 
disclosure, in contrast to the information obtained by those who obtain 
the complete press release.\11\
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    \9\ Id.
    \10\ Id. at 5.
    \11\ Id.
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Nasdaq's Response Letter

    Nasdaq believes that the filing of a Form 8-K provides ``effective, 
broad and non-exclusionary public disclosure,'' and that requiring the 
issuance of a press release in tandem with filing a Form 8-K would 
place a burden on issuers while providing ``no significant benefit to 
investors.''\12\ Nasdaq states that filings made with the Commission 
via EDGAR are available on ``most major financial news Web sites and 
Web portals,'' and lists a number of Web sites that have direct links 
to issuers' filings.\13\ In addition to obtaining this information via 
the Internet, Nasdaq notes that filing of a Form 8-K may result in 
media coverage, and that under Nasdaq rules, issuers must provide 
notification of material news announcements, including those made by 
filing a Form 8-K, to Nasdaq's Market Watch Department before 
disseminating them to the public. The Market Watch Department evaluates 
such information for materiality, and implements trading halts for 
dissemination of news, if appropriate.\14\
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    \12\ Nasdaq Response Letter at p.2.
    \13\ Id.
    \14\ Id.
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    Nasdaq maintains that the proposal is ``designed to harmonize its 
disclosure rules with Regulation FD'' to enable issuers to reap the 
benefits of using ``current technologies as part of a comprehensive 
disclosure strategy,'' and to address concerns that self-regulatory 
organization rules override the flexibility provided by Regulation 
FD.\15\
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    \15\ Id. at p.3.
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III. Discussion and Commission Findings

    The Commission has reviewed carefully the proposed rule change, the 
comment letter, and Nasdaq's response to comments, and finds that the 
proposed rule change is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities association \16\ and, in particular, the requirements of 
section 15A(b)(6) of the Act. Section 15A(b)(6) requires rules that are 
designed to prevent fraudulent and manipulative acts and practices, 
and, in general, to protect investors and the public interest. The 
Commission finds that aligning Nasdaq's disclosure rules with 
Regulation FD should minimize confusion among issuers, while 
simultaneously allowing issuers to use current technologies to 
disseminate material information to the public in a broad, inclusive 
manner. The Commission makes no finding as to whether requiring issuers 
to provide a news release to be distributed by a commercial newswire 
service and posted on the issuer's web site, in addition to filing a 
Form 8-K, will result in expanding the reach of disclosure to the 
investing public. The Commission is satisfied that the proposal 
conforms to the requirements for disclosure as delineated in Regulation 
FD, and as such, finds it is consistent with the requirements of the 
Act, in general, and specifically, with section 15A(b)(6).
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    \16\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-NASD-2002-85) be, and it 
hereby is, approved.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-30538 Filed 12-2-02; 8:45 am]
BILLING CODE 8010-01-P