[Federal Register Volume 69, Number 103 (Thursday, May 27, 2004)]
[Notices]
[Pages 30356-30358]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-12029]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49746; File No. SR-NASD-2004-081]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to Unit Listing Standards

May 20, 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 May 17, 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 and 
II below, which Items have been prepared by Nasdaq. Nasdaq filed the 
proposed rule change pursuant to section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal effective 
upon filing.\5\ 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\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
    \5\ Nasdaq asked the Commission to waive the 30-day operative 
delay. See Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to amend the listing standards for units. Below is 
the text of the proposed rule change. Proposed new language is 
underlined; proposed deletions are in brackets.\6\
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    \6\ The proposal is marked against the rule text of the current 
NASD manual, which is available on www.nasdaq.com. There are no 
other pending rule filings that would affect the text of this rule.
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* * * * *

Rule 4420. Quantitative Designation Criteria

    (a)-(g) no change.
    (h) Units
    (1) Initial and Continued Inclusion Requirements
    (a) All units shall have at least one equity component. All 
components of such units shall satisfy the requirements for initial and 
continued listing under Rules 4420 and 4450, as applicable, or, in the 
case of debt components, satisfy the requirements of 4420(h)(1)(b).
    (b) All debt components of a unit, if any, shall meet the following 
requirements:
    (i) the debt issue must have an aggregate market value or principal 
amount of at least $5 million;
    (ii) the issuer of the debt security must have equity securities 
listed on the Nasdaq National Market; and
    (iii) in the case of convertible debt, the equity into which the 
debt is convertible must itself be subject to real-time last sale 
reporting in the United States, and the convertible debt must not 
contain a provision which gives the company the right, at its 
discretion, to reduce the conversion price for periods of time or from 
time to time unless the company establishes a minimum period of ten 
business days within which such price reduction will be in effect.
    (c) All components of the unit shall be issued by the same issuer. 
All units and issuers of such units shall comply with the initial and 
continued inclusion requirements under Rules 4420 and 4450, as 
applicable.
    (2) Minimum Inclusion Period and Notice of Withdrawal
    In the case of units, the minimum period for inclusion of the units 
shall be 30 days from the first day of inclusion, except the period may 
be shortened if the units are suspended or withdrawn for regulatory 
purposes. Issuers and underwriters seeking to withdraw units from 
inclusion must provide Nasdaq with notice of such intent at least 15 
days prior to withdrawal.
    ([2]3) Disclosure Requirements for Units
    Each Nasdaq National Market issuer of units shall include in its 
prospectus or other offering document used in connection with any 
offering of securities that is required to be filed with the Commission 
under the federal securities laws and the rules and regulations 
promulgated thereunder a statement regarding any intention to delist 
the units immediately after the minimum inclusion period. The issuer of 
a unit shall further provide information regarding the terms and 
conditions of the components of the unit (including information with 
respect to any original issue discount or other significant tax 
attributes of any component) and the ratio of the components comprising 
the unit. An issuer shall also disclose when a component of the unit is 
separately listed on Nasdaq. These disclosures shall be made on the 
issuer's website, or if it does not maintain a website, in its annual 
report provided to unit holders. An issuer shall also immediately 
publicize through, at a minimum, a public announcement through the news 
media, any change in the terms of the unit, such as changes to the 
terms and conditions of any of the components (including changes with 
respect to any original issue discount or other significant tax 
attributes of any component), or to the ratio of the components within 
the unit. Such public notification shall be made as soon as practicable 
in relation to the effective date of the change.
* * * * *

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
    Nasdaq has recently received inquiries about listing of units 
comprised of common stock and subordinated notes, sometimes referred to 
as Income Deposit Securities or IDS's.

[[Page 30357]]

Listing standards for these securities have been approved for the 
American Stock Exchange LLC (``Amex'') and the New York Stock Exchange, 
Inc. (``NYSE''). Nasdaq now proposes listing standards for such units 
that are substantially similar to the standards of these other markets. 
In particular, Nasdaq proposes to require that all units shall have at 
least one equity component, and that all components must meet the 
Nasdaq National Market initial and continued inclusion requirements 
under Nasdaq Rules 4420 and 4450, or in the case of debt components, 
meet certain specified standards including: an aggregate market value 
or principal amount of at least $5 million; a requirement that the debt 
issuer have equity listed on Nasdaq; and in the case of convertible 
debt, limitations on changes to conversion prices and a last sale 
reporting requirement for the equity into which the debt is 
convertible. In that regard, real time last sale reporting must be 
available for the underlying equity security, and it will not be 
sufficient that a unit containing the equity security is subject to 
last sale reporting. In addition, all components of the unit shall be 
issued by the same issuer, and all units and the issuer of such units 
shall be required to comply with the initial and continued inclusion 
requirements under Nasdaq Rules 4420 and 4450, as applicable.
    An issuer would be required to provide information regarding the 
terms and conditions of the components of the unit on a Web site, or if 
it does not maintain a Web site, in its annual report provided to unit 
holders. In addition, an issuer would be required to disclose when a 
component of the unit is separately listed on Nasdaq. The proposal 
would also require an issuer to immediately publicize through, at a 
minimum, a public announcement through the news media, any change in 
the terms of a listed unit, such as changes to the terms and conditions 
of any of the components or to the ratio of components within the unit. 
Nasdaq believes that this heightened disclosure requirement is 
appropriate to ensure that sufficient information regarding the 
attributes of these securities is publicly available on a timely basis.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\7\ in general and with 
section 15A(b)(6) of the Act,\8\ in particular, in that it will promote 
just and equitable principles of trade, facilitate transactions in 
securities, remove impediments to and perfect the mechanism of a free 
and open market and a national securities system, and protect investors 
and the public interest. Specifically, the proposed rule change will 
permit the listing of units comprised of equity and debt components on 
Nasdaq.
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    \7\ 15 U.S.C. 78o-3.
    \8\ 15 U.S.C. 78o-3(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will impose 
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 on the proposed rule change were neither solicited 
nor received.

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

    The foregoing proposed rule change has become effective upon filing 
on May 17, 2004 pursuant to section 19(b)(3)(A) of the Act \9\ and Rule 
19b-4(f)(6) thereunder \10\ because the proposal: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) does not become operative for 30 days from the date on which it 
was filed, 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 its intent to file the proposed rule change at least 
five business days prior to the filing date of the proposed rule 
change.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ As required under Rule 19b-4(f)(6)(iii), Nasdaq provided 
the Commission with written notice of its intent to file the 
proposed rule change at least five business days prior to the filing 
date.
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    Nasdaq has asked the Commission to waive the 30-day operative 
delay. The Commission believes waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The Commission notes that it recently approved similar proposals by the 
Amex and NYSE, which Nasdaq's proposal is based upon.\12\ The Amex and 
NYSE proposals were published for comment and the Commission received 
no comments on them.\13\ Finally, the Commission does not believe 
Nasdaq's proposal raises any new regulatory issues. For these reasons, 
the Commission designates the proposal to be effective and operative 
upon filing of the proposal on May 17, 2004 with the Commission.\14\
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    \12\ See Securities Exchange Act Release No. 48666 (October 21, 
2003); 68 FR 61239 (October 27, 2003) (SR-Amex-2003-83); Securities 
Exchange Act Release No. 49515 (April 1, 2004); 69 FR 19592 (April 
13, 2004) (SR-NYSE-2004-17).
    \13\ See id.
    \14\ 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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    At any time within 60 days of the filing of the amended 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the proposed rule change. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NASD-2004-081 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-NASD-2004-081. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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

[[Page 30358]]

provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Section, 450 Fifth Street, 
NW., Washington, DC 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of Nasdaq. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASD-2004-081 and should be 
submitted on or before June 17, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-12029 Filed 5-26-04; 8:45 am]
BILLING CODE 8010-01-P