[Federal Register Volume 69, Number 68 (Thursday, April 8, 2004)]
[Notices]
[Pages 18658-18660]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7931]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49512; File No. SR-NASD-2004-054]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. To Make Permanent the Current Pilot Program 
for the Imposition of a Fee for Written Interpretations of Nasdaq 
Listing Rules

March 31, 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 March 25, 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. 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 the 
Substance of the Proposed Rule Change

    Nasdaq proposes to make permanent NASD Rule 4550, which provides 
for the imposition of fees for written interpretations of Nasdaq 
listing rules. The text of the proposed rule change is below, which is 
identical to the text proposed in the pilot.\3\
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    \3\ See Securities and Exchange Act Release No. 48450 (September 
4, 2003), 68 FR 53770 (September 12, 2003).
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* * * * *

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
    NASD Rule 4550, which was approved by the Commission on September 
4, 2003,\4\ established a six-month pilot program under which Nasdaq 
charges fees for written interpretations regarding the application of 
the listing rules set forth in the NASD Rule 4200, 4300 and 4400 
Series. The pilot went into effect October 1, 2003, and is scheduled to 
expire on April 1, 2004. Based on a review of the pilot to date, Nasdaq 
proposes adopting this fee on a permanent basis.
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    \4\ Securities and Exchange Act Release No. 48450, 68 FR 53770 
(September 12, 2003).
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    Under NASD Rule 4550, an issuer considering a specific action or

[[Page 18659]]

transaction can request an interpretation from Nasdaq's Listing 
Qualifications staff, and in return, staff will prepare a responsive 
letter to the issuer as to how the rules apply to the proposed action 
or transaction. The Office of General Counsel reviews interpretations 
prior to issuance. This service is provided for a non-refundable fee of 
$2,000, and the process generally takes four weeks. Alternatively, an 
issuer may elect to pay a non-refundable fee of $10,000 to receive an 
expedited response, which will be provided by a specific date that is 
less than four weeks but at least one week after the date staff 
receives all information necessary to respond to the request. No fee is 
charged in connection with requests involving a company's initial 
listing application on Nasdaq or in cases where the fee would present 
economic hardship, such as requests for a financial viability exception 
to Nasdaq's shareholder approval rules.\5\
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    \5\ Telephone call between Mary M. Dunbar, Vice President and 
Deputy General Counsel, Nasdaq, and Leah Mesfin, Attorney, Division 
of Market Regulation, Commission on March 31, 2004.
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    Prior to issuing a final written interpretation, Nasdaq will advise 
the company of the result of staff's analysis and the proposed 
interpretation. If the interpretation is going to be adverse, the 
company is given the opportunity to amend or withdraw their request for 
a written interpretation.
    In the rule filing establishing the pilot program, Nasdaq stated 
that it would evaluate the impact of the pilot program and report its 
findings to the Commission. Nasdaq did so by letters dated March 4, 
2004,\6\ and March 17, 2004.\7\
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    \6\ See letter from Mary Dunbar, Vice President and Deputy 
General Counsel, Nasdaq, to Katherine England, Assistant Director, 
Division of Market Regulation, Commission, dated March 4, 2004.
    \7\ See letter from Mary Dunbar, Vice President and Deputy 
General Counsel, Nasdaq, to Katherine England, Assistant Director, 
Division of Market Regulation, Commission, dated March 17, 2004.
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    Significantly, no comments were received during the comment period 
for the rule filing establishing the pilot program. As noted in the 
above-referenced reports, since the program has been in effect, staff 
has received no complaints from issuers in connection with the fees. In 
fact, while the rule provides Nasdaq with discretion to waive the fee, 
no requests for a fee waiver have been made to date. Several issuers 
and their representatives have expressed unsolicited approval for the 
expedited process, as it provides a means for issuers to be certain of 
their compliance with Nasdaq's corporate governance rules, in 
particular the shareholder approval and voting rights rules, in cases 
where a transaction must be closed imminently.
    An additional public benefit to the program is that staff prepares 
anonymous summaries of correspondence, as well as frequently asked 
questions based on requests received from issuers, including those 
withdrawn before a written response is issued. These summaries and 
questions are posted on the Nasdaq Legal and Compliance Web site so 
that the general public, practitioners, and other issuers can better 
understand how Nasdaq applies its rules and policies. In this way, the 
overall need to request such interpretations is minimized, thus 
reducing burdens on issuers and staff alike.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\8\ in general and with 
section 15A(b)(5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78o-3.
    \9\ 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.

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. We also note 
that, during the comment period for the rule filing establishing the 
pilot program (SR-NASD-2003-105), no comments were received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective upon filing pursuant 
to section 19(b)(3)(A)(ii) of the Act \10\ and subparagraph (f)(6) of 
Rule 19b-4 \11\ thereunder in that it effects a change that does not 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest; provided that the 
self-regulatory organization has given the Commission written notice of 
intent to file the proposed rule change, along with a brief description 
and text of the proposed rule change, at least five business days prior 
to the date of filing of the proposed rule change, or such shorter time 
as designated by the Commission. 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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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(6).
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    Nasdaq has requested that the Commission waive the 5-day pre-filing 
notice requirement and the 30-day operative delay and permit the 
proposed rule change to become operative on April 1, 2004. The 
Commission believes that waiving the 5-day pre-filing notice 
requirement and the 30-day operative delay is consistent with the 
protection of investors and the public interest. The Commission notes 
that the proposal is making the current pilot program permanent, and 
not making any other modifications to it. In addition, the Commission 
notes that it did not receive any comment letters in response to the 
original pilot and has not received any comments during the pilot 
period. Because the pilot is scheduled to expire on April 1, 2004, 
acceleration of the operative date will allow the imposition of the 
fees for written interpretations of Nasdaq's listing rules to continue 
on an uninterrupted basis.\12\
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    \12\ For purposes only of accelerating the operative date of 
this proposal, 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. 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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No.

[[Page 18660]]

SR-NASD-2004-054. This 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 file number SR-NASD-2004-054 and should be 
submitted by April 29, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 04-7931 Filed 4-7-04; 8:45 am]
BILLING CODE 8010-01-P