[Federal Register Volume 68, Number 149 (Monday, August 4, 2003)]
[Notices]
[Pages 45865-45866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-19666]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48236; File No. SR-NASD-2003-105]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by National Association of Securities Dealers, Inc. To Implement 
a Six-Month Pilot Program Establishing Fees for Written Interpretations 
of Nasdaq Listing Rules

July 28, 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 July 3, 2003, 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.\3\ 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\ The Commission revised text in the description of the 
proposed rule change to clarify certain terms of the pilot, and 
added a reference to its proposed start date, with the consent of 
Nasdaq. See e-mails from John Nachmann, Senior Attorney, Nasdaq, to 
Andrew Shipe, Special Counsel, and Leah Mesfin, Attorney, Division 
of Market Regulation, Commission, dated July 21 and July 22, 2003.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to implement a pilot program that establishes fees 
for written interpretations of Nasdaq listing rules. The text of the 
proposed rule change is below. Proposed new language is in italics.
* * * * *

4500. Issuer Listing Fees

4550. Written Interpretations of Nasdaq Listing Rules

    (a) An issuer listed on The Nasdaq SmallCap Market or The Nasdaq 
National Market may request from Nasdaq a written interpretation of the 
Rules contained in the 4000 through 4500 Series. In connection with 
such a request, the issuer must submit to The Nasdaq Stock Market, Inc. 
a non-refundable fee of $2,000. A response to such a request generally 
will be provided within four weeks from the date Nasdaq receives all 
information necessary to respond to the request.
    (b) Notwithstanding paragraph (a), an issuer may request a written 
interpretation of the Rules contained in the 4000 through 4500 Series 
by a specific date that is less than four weeks, but at least one week, 
after the date Nasdaq receives all information necessary to respond to 
the request. In connection with such a request for an expedited 
response, the issuer must submit to The Nasdaq Stock Market, Inc. a 
non-refundable fee of $10,000.
    (c) An applicant to The Nasdaq Stock Market that has submitted the 
applicable entry fee under Rule 4510 or Rule 4520 will not also be 
required to submit a fee in connection with a request for a written 
interpretation involving the applicant's initial inclusion on Nasdaq. 
In addition, an issuer is not required to submit a fee in connection 
with a request for an exception from the Nasdaq shareholder approval 
rules pursuant to Rule 4350(i)(2).
    (d) The Board of Directors of The Nasdaq Stock Market, Inc. or its 
designee may, in its discretion, defer or waive all or any part of the 
written interpretation fee prescribed herein.

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
    The purpose of the proposed rule change is to institute a six-month 
pilot program that establishes a fee for written interpretations of 
Nasdaq listing rules. Nasdaq proposes that this rule change become 
effective on October 1, 2003 or upon Commission approval, whichever 
date is later. Nasdaq will monitor the effect of this rule change on 
the listing rules interpretative process during this period. Prior to 
the completion of the pilot, Nasdaq will evaluate the impact of this 
rule and report its findings to the Commission, and thereafter, 
determine the appropriate course of action.
    Currently, issuers may contact Nasdaq to request an interpretation 
regarding the application of Nasdaq's listing rules to a particular set 
of facts. For example, an issuer negotiating a private placement might 
want to ensure that the proposed transaction does not require 
shareholder approval under Nasdaq's rules. Alternatively, an issuer 
seeking to add a new director to its board of directors may inquire as 
to the impact of a prior relationship with that individual on the 
person's independence under Nasdaq rules.
    Issuers can request formal interpretative guidance of Nasdaq's 
listing rules by submitting a letter that identifies the issuer and 
provides all relevant facts and circumstances surrounding the question. 
Staff of Nasdaq's Listing Qualifications Department will prepare a 
response letter, which the Nasdaq Office of General Counsel reviews 
prior to issuance. Written interpretations are binding on Nasdaq unless 
the issuer has made a material misstatement or omission, there is a 
subsequent change in the facts or circumstances that the issuer 
described in its letter, or there is a subsequent change in Nasdaq's 
listing requirements.\4\ Since written interpretations are based on the 
specific facts and circumstances presented by an issuer, an issuer may 
not rely on a written interpretation that has been provided to another 
issuer. However, to provide transparency regarding our rules and 
policies, Nasdaq publishes anonymous summaries of these interpretative 
letters on its Web site, at http://www.nasdaq.com/about/StaffInterpLetters.stm.
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    \4\ Nasdaq also provides oral guidance regarding its listing 
rules. Issuers will often request such guidance on a ``no names'' 
basis, while they still are structuring a transaction or analyzing 
the impact of a proposed change. Since oral guidance may not be 
based on a complete review of all relevant facts and circumstances, 
it is not binding on Nasdaq.
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    Nasdaq currently provides written interpretations at no cost to 
issuers. In recent years, however, there has been an increase in the 
complexity of transactions for which issuers have sought 
interpretations. As a result, Nasdaq staff now spends an increasing 
amount of time on routine interpretation letters, with some 
interpretations

[[Page 45866]]

requiring as much as 20 staff hours to complete.
    In order to address, in part, the costs associated with the written 
interpretation process, Nasdaq is proposing to adopt a $2,000 fee for 
interpretation letters. Nasdaq will generally respond to such requests 
in the order received, and responses require approximately four weeks 
from the date that Nasdaq receives all information necessary to respond 
to the request. However, Nasdaq recognizes that, due to business 
exigencies or other reasons, an issuer may require an interpretation 
letter in a shorter period of time. In such situations, an issuer can 
request that an interpretation letter be processed by a specific date 
that is less than four weeks, but at least one week, after the date 
Nasdaq receives all information necessary to respond to the request. 
Nasdaq will make all reasonable efforts to meet the date specified by 
the issuer. Nasdaq is proposing to adopt a $10,000 fee for 
interpretation letters processed on an expedited basis.
    Nasdaq will not assess fees for requests submitted by issuers with 
regard to initial listing on Nasdaq, because reviews of these matters 
are considered to be part of the processing of an issuer's application 
and a separate application fee is already charged in these situations. 
In addition, issuers will not be required to submit a fee in connection 
with requests for an exception from the Nasdaq shareholder approval 
rules pursuant to Rule 4350(i)(2), since requests for such exceptions 
involve issuers whose financial viability is in jeopardy. Lastly, in 
order to address other exceptional situations where the payment of a 
fee for an interpretation letter would be inequitable under the 
circumstances, Nasdaq is proposing to provide the Nasdaq Board of 
Directors or its designee the discretion to defer or waive all or any 
part of the written interpretation fee. Such discretion will not be 
used in generally applicable or frequently-replicated situations, but 
only in circumstances that are truly unique.\5\
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    \5\ See letter from Annette L. Nazareth, Director, Division of 
Market Regulation, Commission, to T. Grant Callery, Executive Vice 
President and General Counsel, NASD (March 27, 2003).
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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)(5) of the Act,\7\ in particular, in that the proposal 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers and other persons using any 
facility or system which the NASD operates or controls. Specifically, 
the proposed fees will be imposed equally on all listed issuers that 
request written interpretations of Nasdaq's listing rules and will 
relieve issuers not availing themselves of this process from 
subsidizing its cost.
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    \6\ 15 U.S.C. 78o-3.
    \7\ 15 U.S.C. 78o-3(b)(5).
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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

    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-2003-105 
should be submitted by August 25, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-19666 Filed 8-1-03; 8:45 am]
BILLING CODE 8010-01-P