[Federal Register Volume 71, Number 148 (Wednesday, August 2, 2006)]
[Notices]
[Pages 43829-43831]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-12430]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54221; File No. SR-NASDAQ-2006-005]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Approval of Proposed Rule Change and Amendments No. 1 and 2 
Thereto To Modify Nasdaq's Delisting Procedures To Conform to Recent 
Amendments to Commission Rules Regarding Removal From Listing and 
Withdrawal From Registration

July 26, 2006.

I. Introduction

    On April 4, 2006, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Nasdaq delisting 
procedures to conform to recent amendments to Commission rules 
regarding removal from listing and withdrawal from registration. On May 
5, 2006, Nasdaq filed Amendment No. 1 to the proposed rule change.\3\ 
On May 17, 2006, Nasdaq filed Amendment No. 2 to the proposed rule 
change.\4\ The proposed rule change, as amended, was published for 
comment in the Federal Register on June 15, 2006.\5\ No comments were 
received regarding the proposal. This order approves the proposed rule 
change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced the original proposed rule change 
in its entirety.
    \4\ In Amendment No. 2, Nasdaq amended the implementation date 
of the proposed rule change to the later of Commission approval or 
the date Nasdaq begins to operate as a national securities exchange.
    \5\ See Securities Exchange Act Release No. 53964 (June 8, 
2006), 71 FR 34656.
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II. Description of the Proposed Rule Change

    Section 12 of the Act\6\ and Rule 12d2-2 thereunder\7\ (``SEC Rule 
12d2-2'') govern the process for the delisting and deregistration of 
securities listed on national securities exchanges. Recent amendments 
to SEC Rule 12d2-2 (``amended SEC Rule 12d2-2'') and other Commission 
rules require the electronic filing of revised Form 25 on the 
Commission's Electronic Data Gathering, Analysis, and Retrieval 
(``EDGAR'') system by exchanges and issuers for all delistings, other 
than delistings of standardized options and securities futures, which 
are exempted.\8\
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    \6\ 15 U.S.C. 78l.
    \7\ 17 CFR 240.12d2-2.
    \8\ See Securities Exchange Act Release No. 52029 (July 14, 
2005), 70 FR 42456 (July 22, 2005).
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    Nasdaq proposes to revise Nasdaq Rules 4480, 4804, 4805, 4806, 
4807, 4808, 4809, and adopt Interpretative Material 4800 (``IM 4800'') 
with respect to delisting procedural requirements as mandated by 
amended SEC Rule 12d2-2.
    In the case of exchange-initiated delistings, amended SEC Rule 
12d2-2(b) states that a national securities exchange may file an 
application on Form 25 to strike a class of securities from listing 
and/or withdraw the registration of such securities, in accordance with 
its rules, if the rules of such exchange, at a minimum, provide for:
    (i) Notice to the issuer of the exchange's decision to delist its 
securities;
    (ii) An opportunity for appeal to the exchange's board of 
directors, or to a committee designated by the exchange's board of 
directors; and
    (iii) Public notice of the national securities exchange's final 
determination to remove the security from listing and/or registration, 
by issuing a press release and posting notice on its Web site. Public 
notice must be disseminated no fewer than 10 days before the delisting 
becomes effective pursuant to amended SEC Rule 12d2-2(d)(1), and must 
remain posted on its Web site until the delisting is effective.
    Nasdaq's rules currently provide the requisite issuer notice as 
well as an opportunity for appeal to a committee designated by the 
Nasdaq's board of directors.\9\ Nasdaq proposes to adopt IM 4800 to 
incorporate the requirements of amended SEC Rule 12d2-2. Proposed IM 
4800 sets forth the procedures Nasdaq would follow to remove a security 
from listing. Under proposed IM 4800, Nasdaq would provide public 
notice of its final determination to remove a security from listing by 
issuing a press release and posting a notice on its Web site. Nasdaq 
would disseminate the public notice no fewer than 10 days before the 
delisting becomes effective. The public notice would remain on Nasdaq's 
Web site until the delisting is effective. After the public notice, 
Nasdaq would file a Form 25 with the Commission and would promptly 
provide a copy of such form to the issuer.
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    \9\ See Nasdaq Rules 4803(a), 4805, 4806, 4807, 4808, and 4809.
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    With respect to issuer-initiated delisting procedures, Nasdaq 
proposes to amend Nasdaq Rule 4480\10\ to require the issuer to:
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    \10\ Nasdaq proposes to renumber Nasdaq Rule 4480 to Nasdaq Rule 
4380.
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    (i) Comply with all requirements of amended SEC Rule 12d2-2(c);
    (ii) Comply with all applicable laws in effect in the state in 
which it is incorporated and with applicable Nasdaq rules;
    (iii) Provide notice to Nasdaq no fewer than 10 days before the 
issuer files the Form 25 with the Commission, including a statement of 
the material facts relating to the reasons for delisting;
    (iv) Contemporaneous with providing notice to Nasdaq, publish 
notice of its intent to delist, along with its reasons, via a press 
release and on its Web site, if it has one (any notice provided on the 
Web site must remain available until the delisting is effective); and
    (v) Provide a copy of the Form 25 to Nasdaq simultaneously with the 
filing of the Form 25 with the Commission.
    Nasdaq would provide notice on its Web site of the issuer's intent 
to delist as required by amended SEC Rule 12d2-2(c)(3).
    Nasdaq also proposes that an issuer seeking to voluntarily delist a 
class of securities that has received notice from Nasdaq that the 
issuer fails to comply with one or more requirements for continued 
listing, or is aware that it is below such continued listing 
requirements notwithstanding that it has not received such notice, must 
disclose this fact (including the specific continued listing 
requirements that it is below) in: (i) Its statement of all material 
facts relating to the reasons for withdrawal from listing provided to 
Nasdaq, along with written notice of its

[[Page 43830]]

determination to withdraw from listing required by amended SEC Rule 
12d2-2(c)(2)(ii) and (ii) its press release and Web site notice 
required by amended SEC Rule 12d2-2(c)(2)(iii).
    In addition, Nasdaq proposes to amend Nasdaq Rule 4809 with respect 
to the Nasdaq board of directors' discretionary review of delisting 
decision by the Nasdaq Listing Council. Nasdaq proposes to allow its 
board of directors to withdraw the call for review of a Listing Council 
decision at any time prior to the issuance of a decision. Further, if 
the Nasdaq board of directors has conducted a discretionary review of 
the Listing Council decision, the decision of the Nasdaq board of 
directors will take immediate effect, unless specified to the contrary.
    Finally, Nasdaq proposes to amend Nasdaq Rules 4804(e), 4806(e), 
and 4807(f) to provide that Nasdaq will follow the proposed delisting 
procedures in IM-4800.

III. Discussion

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange\11\ 
and, in particular, the requirements of Section 6 of the Act.\12\ 
Specifically, as discussed below, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\13\ which 
requires, in part, that the rules of an exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, and processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. Further, as noted in more 
detail below, the changes being adopted by Nasdaq meet the requirements 
of amended SEC Rule 12d2-2.
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    \11\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(5).
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A. Exchange Delisting

    Amended SEC Rule 12d2-2(b) states that a national securities 
exchange may file an application on Form 25 to strike a class of 
securities from listing and/or withdraw the registration of such 
securities, in accordance with its rules, if the rules of such 
exchange, at a minimum, provide for notice to the issuer of the 
exchange's decision to delist, opportunity for appeal, and public 
notice of the exchange's final determination to delist. The Commission 
believes that Nasdaq's current rules and procedures comply with the 
dictates of amended SEC Rule 12d2-2(b).
    Nasdaq rules currently provide the requisite issuer notice as well 
as an opportunity for appeal to a committee designated by Nasdaq's 
Board.\14\ Specifically, issuers may appeal Nasdaq staff determinations 
to the Listing Qualifications Panel, which is a panel composed of at 
least two persons designated by the Nasdaq Board.\15\ Adverse decisions 
by the Listing Qualifications Panel may be appealed to the Listing 
Council.\16\ In addition, the Nasdaq Board may in its discretion call 
any Listing Council decision for review.\17\ Finally, the proposed rule 
change will provide for public notice of the Exchange's final 
determination to remove the security from listing and/or registration. 
This should ensure that investors have adequate notice of an exchange 
delisting and is consistent with the protection of investors under 
Section 6(b)(5) of the Act.\18\
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    \14\ See Nasdaq Rules 4804 (Written Notice of Staff 
Determination) and 4805 (Request for Hearing).
    \15\ See Nasdaq Rules 4801(h) and 4806 (The Listing 
Qualifications Panel).
    \16\ See Nasdaq Rule 4806(b).
    \17\ See Nasdaq Rule 4807(e).
    \18\ 15 U.S.C. 78f(b)(5).
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B. Issuer Voluntary Delisting

    In the case of an issuer-initiated delisting, Nasdaq proposes to 
amend Nasdaq Rule 4380 and IM 4800 to require the issuer to:
    (i) Comply with applicable Exchange Rules and applicable state laws 
in which it is incorporated;
    (ii) Provide notice to Nasdaq, no fewer than 10 days before the 
issuer files the Form 25, including a statement of the material facts 
relating to the reasons for delisting (effectively, the notice to 
Nasdaq will be provided at least 20 days before the delisting becomes 
effective); and
    (iii) Contemporaneous with providing notice to Nasdaq, publish 
notice of its intent to delist, along with its reasons, via a press 
release and on its Web site.
    The Commission also notes that Nasdaq will, as required by amended 
SEC Rule 12d2-2(c)(3), post notice of issuer-initiated delistings on 
Nasdaq's Web site beginning on the next business day following receipt 
of notice from the issuer, and Nasdaq will keep the notice posted until 
the delisting becomes effective. The Commission believes that the 
amendment will better inform issuers of the requirements for voluntary 
delisting of their securities under Nasdaq rules and Federal securities 
laws.
    The proposal also sets forth a new requirement not in amended SEC 
Rule 12d2-2 that would require the issuer to notify Nasdaq that it has 
filed a Form 25 with the Commission contemporaneously with such filing. 
The Commission believes that this requirement will allow Nasdaq to be 
fully informed of the filing of a Form 25 and be prepared to take 
timely action to delist the security in accordance with the filing of 
the Form 25.
    In addition, Nasdaq proposes that an issuer seeking to voluntarily 
delist a class of securities that has received a notice from Nasdaq 
that the issuer fails to comply with one or more requirements for 
continued listing, or that the issuer is aware that it is below such 
continued listing requirements notwithstanding that it has not received 
such notice from Nasdaq, must disclose this fact, including the 
specific continued listing requirements that it is below, in: (i) Its 
statement of all material facts relating to the reasons for withdrawal 
from listing provided to Nasdaq along with written notice of the 
issuer's determination to withdraw from listing required by amended SEC 
Rule 12d2-2(c)(2)(ii) and (ii) its press release and Web site notice 
required by amended SEC Rule 12d2-2(c)(2)(iii). The Commission believes 
that this requirement will allow shareholders to be informed and aware 
that the issuer has failed to meet Nasdaq continued listing 
requirements and is voluntarily delisting. Issuers will therefore not 
be permitted to delist voluntarily without public disclosure of their 
noncompliance with Nasdaq continued listing requirements.

C. Implementation

    The Commission notes that Nasdaq will implement this proposal when 
it becomes a national securities exchange. This will ensure that the 
new procedures will be in place when Nasdaq begins operating as a 
national securities exchange, as required by amended SEC Rule 12d2-2.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\19\ that the proposed rule change (SR-Nasdaq-2006-005), as 
amended, is approved.
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    \19\ 15 U.S.C. 78s(b)(2).


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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-12430 Filed 8-1-06; 8:45 am]
BILLING CODE 8010-01-P