[Federal Register Volume 89, Number 139 (Friday, July 19, 2024)]
[Notices]
[Pages 58807-58810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15907]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100538; File No. SR-NASDAQ-2024-038]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Certain Procedures Related to the Suspension and Delisting of 
Acquisition Companies

July 15, 2024.
    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 July 8, 2024, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange (``Commission'') 
the proposed rule change as described in Items I and II 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 amend certain procedures related to the 
suspension and delisting of Acquisition Companies. While these 
amendments are effective upon filing, the Exchange has designated the 
proposed amendments to be operative on October 7, 2024.
    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
    Nasdaq is proposing to amend certain procedures governing the 
suspension and delisting process applicable to a company whose business 
plan is to complete one or more acquisitions, as described in Rule IM-
5101-2 (``Acquisition Company''), that fails to (i) complete one or 
more business combinations satisfying the requirements set forth in 
Listing Rule IM-5101-2(b) (``Business Combination'') within 36 months 
of the effectiveness of its IPO registration statement; or (ii) meet 
the requirements for initial listing following the Business 
Combination. Nasdaq also proposes to limit the Hearings Panels 
authority to review the Nasdaq Staff's decision in these instances to a 
review for factual error only. Finally, Nasdaq also proposes to amend 
Listing Rule 5810(c)(1) to clarify it without a substantive change.\3\
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    \3\ The proposed rule change would eliminate certain differences 
identified by NYSE between Nasdaq's process and that of the NYSE. 
See Securities Exchange Act Release No. 99906 (April 4, 2024), 89 FR 
25291 (April 10, 2024) (SR-NYSE-2024-18).
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    Nasdaq permits the listing of an Acquisition Company only if it 
meets all applicable initial listing requirements, as well as the 
special requirements set forth in Listing Rule IM-5101-2 applicable 
only to Acquisition Companies. Among these special requirements is the 
requirement set forth in Listing Rule IM-5101-2(b) that an Acquisition 
Company must complete one or more business combinations having an 
aggregate fair market value of at least 80% of the value of the deposit 
account (excluding any deferred underwriters fees and taxes payable on 
the income earned on the deposit account) at the time of the agreement 
to

[[Page 58808]]

enter into the initial combination, within 36 months of the 
effectiveness of its IPO registration statement, or such shorter period 
that the company specifies in its registration statement. Listing Rule 
IM-5101-2 further provides that following a Business Combination, the 
company must meet the requirements for initial listing on Nasdaq.
    Listing Rule IM-5101-2 provides that if an Acquisition Company does 
not meet the requirements for initial listing following a business 
combination or does not comply with one of the requirements set forth 
in Listing Rule IM-5101-2, Nasdaq will issue a Staff Delisting 
Determination under Listing Rule 5810 to delist the Company's 
securities. Pursuant to Listing Rule 5810(a), the Staff Delisting 
Determination informs the company of the factual basis for the 
determination and provides instructions regarding the Acquisition 
Company's obligations to disclose the Staff Delisting Determination to 
the public. In addition, pursuant to Listing Rule 5810(a)(3), the Staff 
Delisting Determination informs the company: that its securities will 
be suspended as of a date certain; that it has a right to request 
review of the Staff Delisting Determination by a Hearings Panel; and 
that a timely request for review will stay the suspension. While 
Listing Rule 5815(a)(1)(B) enumerates those instances where a timely 
request for review does not stay the company's suspension, those 
instances do not include a Staff Delisting Determination issued when an 
Acquisition Company fails to comply with the requirements of Listing 
Rule IM-5101-2, and therefore a timely request for a hearing for non-
compliance with the provisions of Listing Rule IM-5101-2 currently 
stays the suspension and delisting action pending the issuance of a 
written panel decision.
    Furthermore, Listing Rule 5815(c)(1)(A) provides that the Hearings 
Panel may, where it deems appropriate grant an exception to the 
continued listing standards for a period not to exceed 180 days from 
the date of the Staff Delisting Determination with respect to the 
deficiency for which the exception is granted. Accordingly, an 
Acquisition Company that fails the requirements in Listing Rule IM-
5101-2 to complete a business combination within 36 months or to meet 
the initial listing requirements following a Business Combination may 
request a review of a Staff Delisting Determination and seek an 
exception to the requirements from the Hearings Panel, and could remain 
listed and trading on Nasdaq pursuant to an exception granted by the 
Panel.
    Nasdaq proposes to amend Rule 5815 to remove the stay provision in 
the situations described above so that an Acquisition Company's 
securities will be suspended from trading on Nasdaq during the pendency 
of the Hearings Panel's review. Specifically, Nasdaq proposes to amend 
Listing Rule 5815(a)(1)(B)(ii) to provide that notwithstanding the 
general rule that a timely request for a hearing shall ordinarily stay 
the suspension and delisting action pending the issuance of a written 
panel decision, a request for a hearing shall not stay the suspension 
of the securities from trading where the matter relates to a request 
made by an Acquisition Company that: (i) failed to complete one or more 
business combinations satisfying the requirements set forth in Listing 
Rule IM-5101-2(b) within 36 months of the effectiveness of its IPO 
registration statement; or (ii) failed to meet the initial listing 
requirements following a Business Combination.\4\ This proposal is 
consistent with the rules of the NYSE.\5\
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    \4\ The existing part of the rule that provides that a stay is 
not available to an Acquisition Company that qualified for listing 
pursuant to the alternative initial listing requirements in Rule 
5406 and that fails to meet the continued listing requirement in 
Rule 5452(a)(1) would remain and is unchanged by this proposed rule 
change.
    \5\ See Sections 102.06 and 802.01 of the NYSE Listed Company 
Manual.
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    In addition, while Hearings Panels currently have the ability to 
grant an exception to an Acquisition Company that failed to (i) 
complete one or more business combinations satisfying the requirements 
set forth in Listing Rule IM-5101-2(b) within 36 months of the 
effectiveness of its IPO registration statement; or (ii) meet the 
requirements for initial listing following the Business Combination, 
Nasdaq staff has observed that this allows Acquisition Companies to use 
the additional time afforded by the administrative process set forth in 
Listing Rule 5815 to regain compliance with the requirements by either 
completing a Business Acquisition (in the case of failing to complete a 
Business Acquisition) or by using the benefits of Nasdaq listing and 
trading to achieve compliance with the initial listing requirements it 
did not satisfy. Nasdaq believes it would enhance investor protection 
to instead provide that the Hearings Panel's review of these issues is 
limited to the question of whether Nasdaq Staff made a factual error 
applying the applicable rule. Accordingly, Nasdaq proposes to adopt a 
new Listing Rule 5815(c)(1)(H) providing that when the Hearings Panel 
review is of a Staff Delisting Determination issued for failure to (i) 
complete one or more business combinations satisfying the requirements 
set forth in Listing Rule IM-5101-2(b) and Listing Rule 5452(a)(3) 
within 36 months of the effectiveness of its IPO registration 
statement; or (ii) meet the requirements for initial listing following 
the Business Combination, the Hearings Panel may only reverse a 
delisting decision where the Hearings Panel determines that the Staff 
Delisting Determination letter was in error and that the Acquisition 
Company never failed to satisfy the requirement. In such cases, the 
Hearings Panel may not consider facts indicating that the company had 
regained compliance since the Staff Delisting Determination, nor may 
the Hearings Panel grant an exception allowing the company additional 
time to regain compliance. Of course if such a company completes a 
business combination after receiving a Staff Delisting Determination 
and/or demonstrates compliance with all applicable initial listing 
requirements, the combined Company could apply to list pursuant to the 
normal application review process.
    Finally, Listing Rule 5810(c)(1) contains a list of deficiencies 
that immediately result in a Staff Delisting Determination. Nasdaq 
proposes to amend Listing Rule 5810(c)(1) to include on this list 
instances where an Acquisition Company fails to comply with one or more 
of the requirements set forth in Rule IM-5101-2, including, without 
limitation, a failure to complete one or more business combinations 
satisfying the requirements set forth in Rule IM-5101-2(b) within 36 
months of the effectiveness of its IPO registration statement or a 
failure to meet the requirements for initial listing following a 
business combination as described in Rule IM-5101-2(d) and (e), are 
subject to immediate suspension and delisting. This proposed amendment 
to Listing Rule 5810(c)(1) does not change the deficiency 
administration process for an Acquisition Company in these 
circumstances because, as described above, Listing Rule IM-5101-2 
already dictates this outcome by requiring an issuance of a Staff 
Delisting Determination. Nasdaq believes that this proposed rule change 
provides additional transparency and improves the readability of the 
rules without changing the substance of the rules.
    Nasdaq will make the proposed rule changes described herein 
operative for Staff Delisting Determination letters based on a failure 
to satisfy IM-5101-2 issued on or after October 7, 2024. To

[[Page 58809]]

that end, Nasdaq proposes to renumber current Listing Rule 
5815(a)(1)(B)(ii)c. to Rule 5815(a)(1)(B)(ii)c.1. while providing that 
this rule applies in the case of a Staff Delisting Determination letter 
issued before October 7, 2024. New Listing Rule 5815(a)(1)(B)(ii)c.2. 
implements the changes described above and will provide that it applies 
in the case of a Staff Delisting Determination letter issued on or 
after October 7, 2024. This delayed implementation will allow 
Acquisition Companies time to adjust to the new rules. The delayed 
implementation will also allow any Acquisition Company that has already 
received a Staff Delisting Determination letter, or that is expecting 
one in the near term, to continue under the prior process for which 
they may have planned.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ 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. 
Specifically, Nasdaq believes that the proposal to amend Listing Rule 
5815(a)(1)(B)(ii) to provide that a hearing request shall not stay the 
suspension of the securities from trading when the request is made by 
an Acquisition Company that (i) failed to complete one or more business 
combinations satisfying the requirements set forth in Listing Rule IM-
5101-2(b) within 36 months of the effectiveness of its IPO registration 
statement or (ii) failed to meet the initial listing requirements 
following a Business Combination is designed to protect investors and 
the public interest. In particular, this change will prevent continued 
trading in such company's securities until an independent Hearings 
Panel reviews the Staff Delisting Determination and determines that 
continued trading on Nasdaq is appropriate, and will prevent a company 
from using the benefits of Nasdaq listing and trading to achieve 
compliance with the requirement to complete a Business Combination or 
with the initial listing requirements the company did not satisfy 
following a Business Combination.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    Nasdaq also believes that limiting the scope of a Hearings Panel 
discretion, in these circumstances, to reverse a delisting decision 
only where the Hearings Panel determines that the Staff Delisting 
Determination letter was in error, is appropriate in light of the need 
to provide transparency and protect prospective investors. The 
requirement to complete a business combination within 36 months is an 
investor protection embedded in Listing Rule IM-5101, and the 
calculation of whether a company complied with that requirement is 
strictly a factual question. Similarly, the question of whether a 
Business Combination failed to meet the initial listing requirements is 
a factual question and limiting the matter before the Hearings Panel to 
that question, along with the other changes described herein, will 
prevent a company from using the benefits of Nasdaq listing and trading 
to achieve compliance with the initial listing requirements it did not 
satisfy, just like any other previously unlisted company. Moreover, 
investors in the Acquisition Company and Business Combination continue 
to be protected because the Business Combination can still submit a new 
application for initial listing on Nasdaq at any point that it does 
satisfy all initial listing requirements, notwithstanding the proposed 
inability of the Panel to grant an exception to allow the company 
additional time to meet the initial listing requirements.
    In addition, Nasdaq believes that the proposed rule change is 
consistent with Section 6(b)(7) of the Act, which requires, among other 
things, that the rules of a national securities exchange provide a fair 
procedure for the prohibition or limitation by the exchange of any 
person with respect to access to services offered by the exchange, 
because following the proposed change an Acquisition Company would be 
able to request a review of the Staff Delisting Determination letter by 
an independent Hearings Panel and because the Hearings Panel will have 
the authority to reverse a delisting decision where the Hearings Panel 
determines that the Staff Delisting Determination letter was in error.
    Finally, Nasdaq believes that a proposal to amend Listing Rule 
5810(c)(1) to provide that securities of an Acquisition Company that 
fails to comply with one or more of the requirements set forth in Rule 
IM-5101-2, including, without limitation, a failure to complete one or 
more business combinations satisfying the requirements set forth in 
Rule IM-5101-2(b) within 36 months of the effectiveness of its IPO 
registration statement or a failure to meet the requirements for 
initial listing following a business combination as described in Rule 
IM-5101-2(d) and (e), are subject to immediate suspension and 
delisting, is designed to remove impediments to and perfect the 
mechanism of a free and open market because this change provides 
transparency and improves the readability of the rules without changing 
their substance.

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. The proposed rule would be 
applied equally to all Acquisition Companies. In addition, the proposed 
rule change will align the process for suspension and delisting of an 
Acquisition Company in the circumstances described above with that of 
the NYSE.\8\
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    \8\ See Sections 102.06 and 802.01 of the NYSE Listed Company 
Manual. See also footnote 3, supra.
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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) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its 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. 
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 necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings

[[Page 58810]]

to determine whether the proposed rule change 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NASDAQ-2024-038 on the subject line.

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-2024-038. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NASDAQ-2024-038 and should 
be submitted on or before August 9, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-15907 Filed 7-18-24; 8:45 am]
BILLING CODE 8011-01-P