[Federal Register Volume 87, Number 243 (Tuesday, December 20, 2022)]
[Notices]
[Pages 77903-77906]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-27497]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96500; File No. SR-NASDAQ-2022-075]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Listing Rules 5605 and 5606

December 14, 2022.
    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 December 12, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') 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 the Exchange. 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to simplify implementation and compliance 
tracking of Listing Rules 5605 and 5606, as described further below.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, 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, the Exchange 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. The Exchange 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
    On December 1, 2020, the Exchange filed with the Commission a 
proposed rule change to adopt listing rules to

[[Page 77904]]

advance board diversity and enhance transparency of diversity 
statistics (``Board Diversity Proposal'').\3\ On August 6, 2021 
(``Approval Date''), the Commission approved the proposal, as amended 
(``Board Diversity Rules).\4\
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    \3\ See Securities Exchange Act Release No. 90574 (December 4, 
2020), 85 FR 80472 (SR-NASDAQ-2020-081).
    \4\ Securities Exchange Act Release No. 92590 (August 6, 2021), 
86 FR 44424 (August 12, 2021) (Approval order). Nasdaq filed an 
amendment to the proposal on February 26, 2021. See Amendment No. 1, 
available on the Commission's website at: https://www.sec.gov/comments/srnasdaq-2020-081/srnasdaq2020081-8425992-229601.pdf. 
Pursuant to Rule 5605(f)(1), ``Approval Date'' means the date that 
the Commission issued an order granting the approval of this 
proposed Rule 5605(f).
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    At the time of filing of the Board Diversity Proposal, Nasdaq and 
listed companies could not know when the proposal would be approved. 
Since directors typically are elected in connection with the annual 
shareholder meeting, Nasdaq wanted to assure that listed companies had 
at least one year from the approval of the rules, or until their next 
annual meeting, to take necessary actions to satisfy the requirements 
of the Board Diversity Rules. Therefore, Nasdaq tied the initial 
compliance deadlines in the Board Diversity Proposal to one year after 
the approval date.\5\ Specifically, on August 8, 2022 (one year after 
the Approval Date),\6\ Nasdaq-listed companies became subject to the 
first compliance condition: disclosing their Board Diversity Matrix 
(``Matrix'').\7\ Subsequent compliance conditions were similarly 
scheduled to take effect starting two or more years from the Approval 
Date.\8\
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    \5\ See Rule 5605(f)(1); see also Rule 5605(f)(7) and 5606(e).
    \6\ The Approval Date became August 8, 2022 because August 6, 
2022 was a Saturday.
    \7\ See Rule 5606.
    \8\ See Rule 5605(f)(7).
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    Nasdaq has found that this formulation of the compliance deadlines 
is confusing and unnecessarily complicated. Therefore, Nasdaq now 
proposes to make technical changes to Rule 5605(f)(3) (Alternative 
Public Disclosure) and Rule 5605(f)(7) (Effective Dates/Transition) to 
simplify the implementation of the Board Diversity Rules by eliminating 
references to the Approval Date and the alternative deadline related to 
the filing of materials for the company's annual meeting, and instead 
requiring compliance by December 31st of the applicable year. Nasdaq is 
also proposing to amend Rule 5605(f)(3) to provide additional 
flexibility in how a company can notify Nasdaq about the alternative 
public disclosure permissible under that rule. Additionally, Nasdaq is 
proposing a technical amendment to Rule 5605(f)(3) to change an 
erroneous reference to a non-existent Rule 5606(f)(2)(D).
Effective Dates
    Pursuant to Rule 5605(f)(7)(A), Nasdaq currently requires each 
company listed on The Nasdaq Global Select Market, The Nasdaq Global 
Market and The Nasdaq Capital Market (including a Company with a 
smaller board under Rule 5606(f)(2)(D)) to have, or explain why it does 
not have, at least one Diverse \9\ director by the later of: (i) two 
calendar years after the Approval Date, which is August 7, 2023 or (ii) 
the date the Company files its proxy statement or its information 
statement (or, if the Company does not file a proxy, in its Form 10-K 
or 20-F) for the Company's annual shareholders meeting during the 
calendar year of the First Effective Date,\10\ which can be no later 
than December 31, 2023. The Exchange is proposing to replace this 
deadline with December 31, 2023, which is the deadline under the 
current rule for a company with a December 31st fiscal year-end to hold 
its annual shareholder meeting during the calendar year of the First 
Effective Date.
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    \9\ Pursuant to Rule 5605(f)(1), ``Diverse'' means an individual 
who self-identifies in one or more of the following categories: 
Female, Underrepresented Minority, or LGBTQ+. ``Female'' means an 
individual who self-identifies her gender as a woman, without regard 
to the individual's designated sex at birth.
    \10\ The ``First Effective Date'' is defined as two calendar 
years after the Approval Date. See Rule 5605(f)(7)(A).
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    Similarly, pursuant to Rule 5605(f)(7)(B), Nasdaq currently 
requires all companies listed on The Nasdaq Global Select Market or The 
Nasdaq Global Market to have, or explain why it does not have, at least 
two Diverse directors by the later of: (i) four calendar years after 
the Approval Date (``Second NGS/NGM Effective Date''), which is August 
6, 2025 or (ii) the date the Company files its proxy statement or its 
information statement (or, if the Company does not file a proxy, in its 
Form 10-K or 20-F) for the Company's annual shareholders meeting during 
the calendar year of the Second NGS/NGM Effective Date, which can be no 
later than December 31, 2025. The Exchange is proposing to replace this 
deadline with December 31, 2025, which is the deadline under the 
current rule for a company with a December 31st fiscal year-end to hold 
its annual shareholder meeting during the calendar year of the Second 
NGS/NGM Effective Date.
    Lastly, Rule 5605(f)(7)(C) currently requires each Company listed 
on The Nasdaq Capital Market to have, or explain why it does not have, 
at least two Diverse directors by the later of: (i) five calendar years 
after the Approval Date (``Second NCM Effective Date''), which is 
August 6, 2026 or (ii) the date the Company files its proxy statement 
or its information statement (or, if the Company does not file a proxy, 
in its Form 10-K or 20-F) for the Company's annual shareholders meeting 
during the calendar year of the Second NCM Effective Date, which is no 
later than December 31, 2026. The Exchange is proposing to replace this 
deadline with December 31, 2026, which is the deadline under the 
current rule for a company with a December 31st fiscal year-end to hold 
its annual shareholder meeting during the calendar year of the Second 
NCM Effective Date.
    Nasdaq is also proposing to align the proposed December 31st 
deadlines for Rule 5605(f)(7) with the Rule 5606(f)(3) deadline for 
companies to explain why they do not meet the diversity objectives of 
Rule 5606(f)(2). Therefore, Nasdaq is proposing to amend Rule 
5606(f)(3) to allow for companies to provide such disclosure on or 
before December 31st.
    Additionally, Rule 5606(e) provides a deadline for a company's 
initial Matrix disclosure and requires a company to annually disclose 
the Matrix thereafter, but the current rule does not provide a specific 
deadline for subsequent disclosures, other than that such disclosure 
must be made in the same manner as, and concurrently with, the 
disclosure required in Rule 5605(f)(3) for those companies that are 
subject to that provision. Therefore, Nasdaq is proposing to modify 
Rule 5606(b) to specify the method of disclosure, which is the same as 
outlined in Rule 5605(f)(3), and the December 31st annual deadline for 
the required Matrix disclosure.
    Nasdaq believes that using December 31st as the applicable deadline 
for various elements of the diversity objectives of Rule 5605(f) and 
Matrix disclosure of Rule 5606 aligns these deadlines with the end of 
the fiscal year for most companies,\11\ which is also the deadline for 
those companies to hold their annual meeting under Nasdaq's rules.\12\ 
As such, Nasdaq believes that aligning the deadline for these 
disclosures with the December 31st

[[Page 77905]]

deadline for most companies to hold the annual meeting will simplify 
both compliance and compliance monitoring with these rules.\13\ In that 
regard, Nasdaq notes that while companies tend to hold their annual 
meetings at a similar time each year, they are not required to do so, 
and do not necessarily file their proxies or information statements at 
the same time each year. Moreover, neither Nasdaq nor investors know 
ahead of time when a company will file their proxy statements or 
information statements. Establishing a single deadline for all 
companies will therefore simplify Nasdaq's ability to review for 
instances of non-compliance and give investors a final date to expect a 
company's disclosure.
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    \11\ Approximately 80% of Nasdaq-listed companies subject to the 
rule have a December 31st fiscal year-end.
    \12\ See Rule 5620 (requiring most listed companies to hold an 
annual meeting of shareholders no later than one year after the end 
of the Company's fiscal year-end). Under Rules 5605(f)(3) and 
5606(b), companies can include disclosure about why they do not meet 
the applicable diversity objectives of Rule 5605(f)(2) and the 
Matrix in the proxy or information statement for their annual 
meeting.
    \13\ Of course, companies will continue to be able to comply 
earlier than the proposed December 31st deadline.
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Notice to Nasdaq
    Currently, if a Nasdaq-listed company posts its Matrix disclosure 
or its explanation for why the company does not satisfy the diverse 
director objective on its website, then the company must also submit a 
URL link to the disclosure through the Nasdaq Listing Center within one 
business day after posting on the company's website.\14\ To provide 
additional flexibility to companies, Nasdaq is proposing to also allow 
companies to submit the URL link via email to 
``[email protected]''. Nasdaq notes that providing the 
additional alternative may simplify compliance for companies and will 
not affect Nasdaq's ability to review for instances of non-compliance.
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    \14\ See Rule 5605(f)(3).
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Technical Changes
    Nasdaq is proposing a technical amendment to Rule 5605(f)(3) to 
change an erroneous reference to a non-existent Rule 5606(f)(2)(D). The 
reference was intended to be 5605(f)(2)(D). Nasdaq is also proposing to 
remove Rule 5606(e) since the rule became effective and operative over 
a year ago and Nasdaq believes the provision is no longer relevant.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\15\ in general, and furthers the objectives of section 
6(b)(1) of the Act,\16\ in particular, in that the Exchange is 
organized and has the capacity to be able to carry out the purposes of 
the Act and to comply and enforce compliance by its members and persons 
associated with its member. The Exchange believe the proposal is also 
consistent with section 6(b)(5) of the Act,\17\ in particular, in that 
it is designed to promote just and equitable principles of trade, 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.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(1).
    \17\ 15 U.S.C. 78f(b)(5).
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    It is consistent with the Act to amend Rule 5605(f)(7) governing 
the effective dates of the Diverse director objective. When proposing 
changes to its rulebook, Nasdaq must ensure that the changes remain 
consistent with other provisions. Presently, companies that opt to 
publish the alternative public disclosure rather than satisfy the 
Diverse director objective must do so in the same manner, and 
concurrently with Rule 5606--the Matrix disclosure.\18\ The proposed 
amendments to Rule 5605(f)(7) aligns the annual deadline for companies 
that opt to explain why they do not satisfy the Diverse director 
objective with the proposed annual deadline for the Matrix. Companies 
will continue to have the option of publishing the disclosure sooner 
than the proposed December 31st deadline.
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    \18\ See Rule 5605(f)(3) and Rule 5606(b).
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    Similarly, the Exchange's proposal to amend its rule requiring 
Nasdaq-listed companies to publicly disclose board diversity statistics 
using the Matrix, or a substantially similar format, at Rule 5606(e), 
is consistent with the Act. Clarifying the date for subsequent Matrix 
disclosures ensures that all Nasdaq-listed companies will disclose a 
Matrix during each calendar year. Additionally, proposing December 31st 
as the deadline each year simplifies compliance and more closely aligns 
the deadline with the end of the fiscal year for most companies, which 
is also their deadline to hold an annual meeting. Moreover, this 
revised formulation provides all Nasdaq-listed companies with the same 
compliance deadline, which is the same as the latest calendar date for 
compliance under the current rule.\19\ As discussed above, Companies 
will continue to have the option of publishing the disclosure sooner 
than the proposed December 31st deadline. Nasdaq also believes that 
having the same annual deadline date for all companies will simplify 
Nasdaq's ability to track non-compliant companies and give investors a 
final date to expect a company's disclosure.
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    \19\ Currently, all Nasdaq-listed companies are required to file 
an annual proxy or information statement by the end of the company's 
fiscal year. The end of the fiscal year for most Nasdaq-listed 
companies is December 31st. Therefore, Nasdaq is proposing to 
simplify the deadlines by aligning the Board Diversity Rule 
deadlines with the most company's fiscal year end.
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    Additionally, it is consistent with the Act to amend Rule 
5605(f)(3) to give companies an additional alternative for submitting 
the URL link to their disclosures. The additional option of submitting 
the URL via email simplifies compliance and gives companies flexibility 
in meeting their requirements. Moreover, there will be no impact on 
Nasdaq's ability to review for instances of non-compliance.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. All companies would continue to 
be required to make the same disclosure of their board-level 
statistical information and will have the same deadline for that 
disclosure. Additionally, all companies would be given the same 
flexibility of alternatively submitting the URL link to their 
disclosure via email. Similarly, all companies would be given the same 
maximum amount of time to publish their Matrix and to satisfy the 
Diverse director objective.
    Moreover, none of the proposed changes will unduly burden intra-
market competition among various Exchange participants. Participants 
will experience no competitive impact from the proposals, as these 
proposals are merely intended to assist companies in maintaining 
compliance with the Board Diversity Rules by providing additional 
flexibility, clarifying certain provisions, and maintaining consistency 
among the provisions.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to section 19(b)(3)(A)(iii) of the Act \20\ and

[[Page 77906]]

subparagraph (f)(6) of Rule 19b-4 thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or 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 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 email to [email protected]. Please include 
File Number SR-NASDAQ-2022-075.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2022-075. This 
file number should be included on the subject line if email 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 website (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 provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2022-075, and should be submitted 
on or before January 10, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-27497 Filed 12-19-22; 8:45 am]
BILLING CODE 8011-01-P