[Federal Register Volume 70, Number 33 (Friday, February 18, 2005)]
[Notices]
[Pages 8414-8416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-666]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51197; File No. SR-NASD-2005-003]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change To Amend Rule 
4350(n) and IM-4350-7 To Conform the Time Frame for the Disclosure of a 
Waiver to a Company's Code of Conduct to the Time Frame Required for 
Similar Disclosure by the Commission's Form 8-K

February 14, 2005.
    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 12, 2005, the National Association of

[[Page 8415]]

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 modify Rule 4350 and related interpretative 
material to conform the time frame for the disclosure of a waiver to a 
company's code of conduct to the time frame required for similar 
disclosure by the Commission's Form 8-K. Nasdaq will implement the 
proposed rule change immediately upon approval by the Commission. The 
text of the proposed rule change is available on Nasdaq's Web site 
(http://www.nasdaq.com), at the principal office of the NASD, and at 
the Commission's Public Reference Room.

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 4350(n) requires each Nasdaq-listed issuer to adopt a 
code of conduct applicable to all directors, officers and employees of 
the issuer. This rule also requires that any waivers of the code for 
directors or executive officers must be approved by the issuer's board 
of directors and that issuers (other than foreign private issuers) must 
disclose such waivers in a Form 8-K within five business days.
    Similarly, Item 406 of Regulations S-K and S-B \3\ require an 
issuer to disclose whether the issuer has adopted a code of ethics that 
applies to its principal executive officer, principal financial 
officer, principal accounting officer or controller, or persons 
performing similar functions. The Commission also requires an issuer to 
disclose waivers of the code that are granted to those individuals. 
Recent amendments to Form 8-K shorten the time frame for this 
disclosure from five business days to four business days.\4\
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    \3\ 17 CFR 229.406(a) and 228.406(a).
    \4\ Securities Act Release No. 8400 (March 16, 2004), 69 FR 
15594 (March 25, 2004). These amendments were effective August 23, 
2004.
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    To conform with these Commission changes, Nasdaq proposes to modify 
the existing five business-day period for disclosure in its rules to 
instead require such disclosure within four business days of the 
granting of a waiver to the code of conduct to any executive officer or 
director.\5\
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    \5\ Foreign private issuers will continue to be permitted to 
make such disclosure either on the issuer's next Form 20-F or 40-F, 
or on a Form 6-K, consistent with the Commission's requirements. See 
Securities Act Release No. 8177, 68 FR 5110 (Jan. 31, 2003) 
(adopting new Item 16B to Form 20-F and paragraph (9) to General 
Instruction B of Form 40-F regarding disclosure by foreign private 
issuers of waivers to the code of conduct). See also Securities 
Exchange Act Release No. 50573 (Oct. 20, 2004), 69 FR 62493 (Oct. 
26, 2004) (adopting conforming changes to NASD Rule 4350(n) and IM-
4350-7).
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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)(6) of the Act,\7\ 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. The proposed rule change is 
consistent with these requirements in that it is designed to enhance 
the disclosure required by issuers and align that disclosure with the 
time frames required by the Commission for similar disclosures, thereby 
reducing confusion among issuers and investors.
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    \6\ 15 U.S.C. 78o-3.
    \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 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, as amended, is consistent with the Act. 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-2005-003 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-2005-003. 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

[[Page 8416]]

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 also will be available for 
inspection and copying at the principal office of the NASD. 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-2005-003 and 
should be submitted on or before March 11, 2005.

    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. E5-666 Filed 2-17-05; 8:45 am]
BILLING CODE 8010-01-P