[Federal Register Volume 68, Number 132 (Thursday, July 10, 2003)]
[Notices]
[Pages 41193-41194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-17474]



[[Page 41193]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48124; File No. SR-NASD-2002-138]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. To 
Require Non-U.S. Issuers To Disclose Any Exemptions They May Receive 
From Nasdaq's Corporate Governance Listing Standards

July 2, 2003.
    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 October 9, 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. 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 proposes to implement changes to its listing standards 
relating to foreign issuers that are aimed at helping to restore 
investor confidence by enhancing transparency.\3\ Nasdaq proposes that 
the rule take effect for new listings and filings made on or after 
January 1, 2004.
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    \3\ See also Securities Exchange Act Release No. 47516 (March 
17, 2003), 68 FR 14451 (March 25, 2003) (NASD 2002-141) for a 
description of additional proposed revisions to NASD's corporate 
governance listing standards.
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    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.

Rule 4350. Qualitative Listing Requirements for Nasdaq National Market 
and Nasdaq Small Cap Market Issuers Except for Limited Partnerships 
Traded on the Nasdaq National Market
    (a) Applicability.
    No provisions of this Rule shall be construed to require any 
foreign issuer to do any act that is contrary to a law, rule or 
regulation of any public authority exercising jurisdiction over such 
issuer or that is contrary to generally accepted business practices in 
the issuer's country of domicile. Nasdaq shall have the ability to 
provide exemptions from [the applicability of] this Rule as may be 
necessary or appropriate to carry out this intent, except to the extent 
that such exemptions would be contrary to the federal securities laws. 
An issuer that receives an exemption under this subsection must 
disclose in its annual report filed with the Commission (e.g., Forms 
20-F, 40-F, or 10-K) each requirement from which it is exempted and 
describe the alternative practice, if any, of the issuer in lieu of 
these requirements. In addition, foreign issuers making their initial 
public offering or first U.S. listing on Nasdaq must disclose any such 
exemptions in their registration statement (e.g., Forms F-1, 20-F, or 
40-F).
    IM-4350: Currently, foreign issuers listed on Nasdaq may obtain 
exemptions from Nasdaq's corporate governance standards if such rules 
would require the issuer to do anything contrary to the laws, rules, 
regulations or generally accepted business practices of the home 
country. Nasdaq believes that the current exemption process should be 
made more transparent for the benefit of investors.
    Accordingly, the proposed rule change requires a foreign issuer to 
disclose the receipt of a corporate governance exemption from Nasdaq in 
the issuer's annual report with the Commission, and at the time of the 
issuer's original listing in the United States, if that listing is on 
Nasdaq. The disclosure must include a statement of what alternative 
measures, if any, the issuer has taken in lieu of the particular 
corporate governance requirement from which it was exempted. Nasdaq 
believes that such disclosure will not only alert investors that the 
issuer has been granted an exemption from certain Nasdaq rules, but may 
also cause foreign issuers to consider carefully their need for an 
exemption, rather than applying for one as a matter of course.
* * * * *

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
    Disclosure of Exemptions to Corporate Governance Standards. 
Currently, non-U.S. issuers listed on Nasdaq may obtain exemptions from 
Nasdaq's corporate governance standards if such rules would require the 
issuer to do anything contrary to the laws, rules, regulations or 
generally accepted business practices of the issuer's home country. 
Nasdaq believes that the current exemption process should be made more 
transparent for the benefit of investors. Accordingly, the proposed 
rule change requires a foreign issuer to disclose the receipt of a 
corporate governance exemption from Nasdaq in its annual report for the 
year the exemption is granted and on an annual basis thereafter. Such 
disclosure must be made within the issuer's annual filing of its 
financial statements with the Commission and Nasdaq on Forms 20-F, 40-
F, or, in certain cases, Form 10-K. The disclosure must include a 
statement of what alternative measures, if any, the issuer has taken, 
pursuant to home country law or practice, in lieu of the particular 
corporate governance requirement from which it was exempted. Nasdaq 
believes that such disclosure will not only alert investors that the 
issuer has been granted an exemption from certain Nasdaq rules, but may 
also cause non-U.S. issuers to consider carefully their need for an 
exemption, rather than applying for one as a matter of course. In 
addition, the proposed rule change clarifies that any exemption from 
Nasdaq requirements granted by Nasdaq in no way affects the issuer's 
obligation to comply with applicable law and regulation.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\4\ in general, and with 
section 15A(b)(6) of the Act,\5\ in particular, in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, remove impediments to a free 
and open market and a national market system, and, in general, to 
protect investors and the public interest.
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    \4\ 15 U.S.C. 78o-3.
    \5\ 15 U.S.C. 78o-(b)(6).

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[[Page 41194]]

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

    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 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-2002-138 
should be submitted by July 31, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-17474 Filed 7-9-03; 8:45 am]
BILLING CODE 8010-01-P