[Federal Register Volume 69, Number 40 (Monday, March 1, 2004)]
[Notices]
[Pages 9662-9665]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4427]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49306; File No. SR-NASD-2004-018]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the National Association of 
Securities Dealers, Inc. To Amend the Procedures for Review of Nasdaq 
Listing Determinations

February 23, 2004.
    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 January 28, 2004, 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. On February 
20, 2004, Nasdaq submitted Amendment No. 1 to the proposal,\3\ which 
replaced the original proposal in its entirety. The Commission is 
publishing this notice to

[[Page 9663]]

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\ See letter from Mary M. Dunbar, Vice President and Deputy 
General Counsel, Nasdaq, to Katherine A. England, Division of Market 
Regulation, Commission, dated February 20, 2004 (``Amendment No. 
1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq is filing a proposed rule change to amend the procedures for 
review of listing determinations. Below is the text of the proposed 
rule change, as amended. Proposed new language is underlined; proposed 
deletions are in brackets.
* * * * *

4800. Procedures for Review of Nasdaq Listing Determinations

4830. The Listing Qualifications Panel
    (a)-(c) No change
    (d) If, following the hearing, the Listing Qualifications Panel 
cannot reach an unanimous decision regarding the matter under review, a 
Panel Decision shall not be issued and the issuer shall be notified of 
this circumstance. Thereafter, the issuer shall be provided an 
additional hearing before a Listing Qualifications Panel composed of 
three persons who did not participate in the previous hearing. The 
issuer may determine whether the hearing will be conducted based on the 
written record or an oral hearing, whether in person or by telephone. 
The issuer may submit any documents or other written material in 
support of its request for review, including any information not 
available at the time of the initial hearing before the Listing 
Qualifications Panel. There shall be no fee for the new hearing.

4845. Reconsideration by the Listing Qualifications Panel and the 
Listing and Hearing Review Council

    (a) An issuer may request that the Listing Qualifications Panel 
reconsider a Panel Decision only upon the basis that a mistake of 
material fact existed at the time of the Panel Decision. The issuer's 
request shall be made within seven calendar days of the date of 
issuance of the Panel Decision. An issuer's request for reconsideration 
shall not stay a Listing Qualifications Panel delisting determination 
unless the Listing Qualifications Panel issues a written determination 
staying the delisting prior to the scheduled date for delisting. An 
issuer's request for reconsideration shall not toll the time period set 
forth in Rule 4840(b) for the issuer to initiate the Listing Council's 
review of the Panel Decision. If the Listing Qualifications Panel 
grants an issuer's reconsideration request, the Listing Qualifications 
Panel shall issue a modified decision within 15 calendar days following 
the issuance of the original Panel Decision or lose jurisdiction over 
the matter. If the Listing Council calls a Panel Decision for review on 
the same issue that the issuer has requested reconsideration by the 
Listing Qualifications Panel, the Listing Council, in its discretion, 
may assert jurisdiction over the Panel Decision or may permit the 
Listing Qualifications Panel to proceed with the reconsideration.
    (b) An issuer may request that the Listing Council reconsider a 
Listing Council Decision only upon the basis that a mistake of material 
fact existed at the time of the Listing Council Decision. The issuer's 
request shall be made within seven calendar days of the date of 
issuance of the Listing Council Decision. If the Listing Council grants 
an issuer's reconsideration request, the Listing Council shall issue a 
modified decision within 15 calendar days following the issuance of the 
original Listing Council Decision or lose jurisdiction over the matter.
    (c) The Listing Qualifications Panel and the Listing Council may 
correct clerical or other non-substantive errors in their respective 
decisions either on their own motion or at the request of an issuer.
4880. Delivery of Documents
    Delivery of any document under this Rule 4800 Series by an issuer 
or by the Association may be made by hand delivery to the designated 
address, [or] by facsimile to the designated facsimile number and 
overnight courier to the designated address, or by e-mail if the issuer 
consents to such method of delivery. Delivery will be considered timely 
if hand delivered prior to the relevant deadline or upon being e-mailed 
or faxed and/or sent by overnight courier service prior to the relevant 
deadline. If an issuer has not specified a facsimile number or street 
address, delivery will be made to the last known facsimile number and 
street address. If an issuer is represented by counsel or a 
representative, delivery will be made to the counsel or representative.
* * * * *

I. 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 amend several of 
Nasdaq's procedures for review of listing determinations as described 
below.

Listing Qualifications Panel Deadlocks

    NASD Rule 4840(a) requires that all Listings Qualifications Panel 
hearings be conducted by at least two persons designated by the Nasdaq 
Board of Directors. Nasdaq's practice is to conduct such hearings 
before Listing Qualifications Panels comprised of two members. Based on 
comments from Commission staff regarding the need for specific 
procedures to address a Listing Qualifications Panel deadlock, Nasdaq 
proposes to amend NASD Rule 4830 to address such situations.
    Specifically, if the Listing Qualifications Panel is unable to 
agree on a Panel Decision, the issuer will be notified immediately and 
afforded the opportunity for a new hearing before an entirely new 
Listing Qualifications Panel comprised of three members. The issuer 
will have the opportunity to select whether the new hearing will be by 
written submission, telephone, or in person. All documents from the 
original record will be retained for the new Listing Qualifications 
Panel's consideration. In addition, the issuer and Nasdaq staff will be 
afforded the opportunity to supplement the record on review, including 
any information that was not available at the time of the first hearing 
before the Listing Qualifications Panel. There will be no additional 
fee for the new hearing before the Listing Qualifications Panel because 
such a fee would be inequitable to issuers as a Listing Qualifications 
Panel deadlock is not within an issuer's control.

Reconsideration of Listing Qualifications Panel and Listing Council 
Decisions

    Nasdaq believes that, in certain situations, it is appropriate for 
the Listing Qualifications Panel or the Nasdaq Listing and Hearing 
Review Council (``Listing Council'') to have an opportunity to 
reconsider their decision. Therefore, Nasdaq proposes to adopt a rule 
that sets forth the procedures and circumstances under which such 
reconsiderations can be made.

[[Page 9664]]

    Nasdaq proposes to allow issuers to request that the Listing 
Qualifications Panel or the Listing Council reconsider a prior decision 
when there is a mistake of material fact in the decision. Under this 
standard, reconsideration would be appropriate only if the issuer can 
demonstrate that the original decision was based on the Listing 
Qualifications Panel or Listing Council's misunderstanding or lack of 
knowledge of a material fact that was in existence at the time of the 
decision. For example, reconsideration of a decision would be 
appropriate if the Listing Qualifications Panel delisted an issuer 
based on its failure to meet the shareholders' equity listing standard, 
not realizing that, prior to the decision, the issuer had increased its 
shareholders' equity by completing a private placement. Reconsideration 
of a Listing Qualifications Panel or Listing Council decision would not 
be granted for any material fact that occurs after the decision.
    Under the proposed rule, issuers would be required to apply for 
reconsideration within seven calendar days of the date of issuance of 
the Listing Qualifications Panel or Listing Council decision. A request 
for reconsideration would not stay a Panel delisting determination, 
unless the Panel were to issue a written determination staying the 
delisting prior to the scheduled date for the delisting. Likewise, a 
request for reconsideration of a Panel Decision would not toll the 15-
calendar-day period for appealing such a decision to the Listing 
Council that is set forth in NASD Rule 4840(b). As such, issuers that 
request reconsideration of a Panel Decision must also appeal the Panel 
Decision within the 15-day period provided in the Rule if they wish the 
Listing Council to review the decision.
    In situations where reconsideration is granted by the Listing 
Qualifications Panel, a revised Panel Decision must be issued within 15 
calendar days of the original Panel Decision. If the Listing 
Qualifications Panel does not issue a modified decision within that 
time period, the Listing Qualifications Panel will lose jurisdiction 
over the matter so that parallel proceedings with the Listing Council 
are avoided.\4\
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    \4\ If the Listing Council has called a matter for review on the 
same issue that the issuer has requested reconsideration, the 
Listing Council can claim jurisdiction over the matter and there 
will be no further consideration of the issue by the Listing 
Qualifications Panel. Issuers do not have the ability to determine 
whether the Listing Qualifications Panel or the Listing Council has 
jurisdiction over a matter that has been called for review by the 
Listing Council.
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    Where reconsideration is granted by the Listing Council, a revised 
Listing Council Decision must be issued within 15 calendar days of the 
original Listing Council Decision. If the Listing Council does not 
issue a modified decision within that time period, the Listing Council 
will lose jurisdiction over the matter so that parallel proceedings 
with the NASD Board are avoided.\5\
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    \5\ NASD Rule 4850 provides that the NASD Board may call a 
Listing Council Decision for review not later than the next NASD 
Board meeting that is 15 calendar days or more following the date of 
the Listing Council Decision.
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    Lastly, Nasdaq proposes to allow both the Listing Qualifications 
Panel and the Listing Council to correct clerical and other non-
substantive errors in a decision, either on their own initiative or at 
the request of an issuer.

Delivery of Documents Via E-mail

    NASD Rule 4880 provides that the delivery of documents in 
connection with the review of listing determinations may be made by 
hand or by facsimile and overnight courier. Over the past several 
years, Nasdaq has received numerous requests from issuers to submit 
documents via e-mail as it is a more cost effective and expeditious 
form of delivery.
    In response to such requests, Nasdaq proposes to amend Rule 4880 to 
include e-mail as an allowable method of service. Thus, issuers would 
have the option of delivering documents by hand, facsimile and 
overnight courier, or e-mail.\6\ Nasdaq would continue to deliver 
documents to issuers only by facsimile and overnight delivery unless an 
issuer specifically consents to receive delivery by e-mail.
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    \6\ As with documents sent via facsimile and overnight courier, 
delivery of a document sent by e-mail would be considered timely 
under NASD Rule 4880 if it were sent prior to the relevant deadline.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change, as amended, is 
consistent with the provisions of Section 15A(b)(6) of the Act \7\ in 
that the proposal is designed to prevent fraudulent and manipulative 
acts and practices and to protect investors and the public interest. 
Nasdaq believes that the proposed rule change is designed to improve 
the procedures applicable to the review of listing determinations as 
well as to provide greater transparency to these procedures.
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    \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 would result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Nasdaq neither solicited nor received written comments with respect 
to the proposed rule change.

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 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. Comments 
may also be submitted electronically at the following e-mail address: 
[email protected]. All comment letters should refer to File No. SR-
NASD-2004-018. The file number should be included on the subject line 
if e-mail is used. To help the Commission process and review your 
comments more efficiently, comments should be sent in hardcopy or by e-
mail but not by both methods. 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 Nasdaq. All 
submissions should refer to the File No.

[[Page 9665]]

SR-NASD-2004-018 and should be submitted by March 22, 2004.

    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. 04-4427 Filed 2-27-04; 8:45 am]
BILLING CODE 8010-01-P