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Self-Regulatory Organizations; Order Granting Approval of Proposed Rule Change by the National Association of Securities Dealers, Inc. Requiring Public Disclosure of Receipt of a Delisting Notice

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Start Preamble November 9, 2000.

I. Introduction

On August 10, 2000, the National Association of Securities Dealers Inc. (“NASD” or “Association”), through its wholly owned subsidiary, the Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission” or “SEC”), 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 that would require an issuer to publicly disclose the receipt of a delisting notice for failure to comply with Nasdaq's continued listing requirements. Notice of the proposed rule change appeared in the Federal Register on October 5, 2000.[3] The Commission received no comments on the proposed rule change. This order approves the proposed rule change.

II. Description of the Proposal

Nasdaq proposes to amend Rule 4815(b) and IM 4120-2, “Disclosure of Written Notice of Staff Determination,” to require an issuer to make a public announcement through the news media disclosing the receipt of a written staff determination to prohibit continued listing requirements (“Staff Determination”) and the rule(s) upon which the Staff Determination was based. The proposal also requires the public announcement to be make as promptly as possible, but not more than seven calendar days following the receipt of the Staff Determination. Additionally, the proposal provides that if the public announcement is not made by the issuer within the time allotted, trading of its securities shall be halted, even if the issuer appeals the Staff Determination as set forth in Rule 4820. If the issuer fails to made the public announcement by the time that the Listings Qualification Panel issues its decision, that decision will also determine whether to delist the issuer's securities for failure to make the public announcement.

According to Nasdaq, the proposed rule change is designed to require a Nasdaq issuer to publicly disclose the receipt of a written delisting notice for failure to comply with the continued listing requirements. Since Nasdaq does not currently have such a requirement, some Nasdaq issuers publicly disclose the receipt of a Staff Determination while other issuers do not make the disclosure. In this regard, Nasdaq proposes that the public announcement shall not only disclose the receipt of a Staff Determination, but shall also indicate the Marketplace Rule(s) upon which it was based.

Furthermore, Nasdaq proposes that an issuer be required to make the public announcement as promptly as possible, but not more than seven calendar days following the receipt of the Staff Start Printed Page 69595Determination. Nasdaq believes this time frame will provide an issuer with a sufficient opportunity to prepare a public announcement while also ensuring that investors receive information in a timely manner. If an issuer fails to disclose the receipt of a Staff Determination, trading of its securities will be halted until the disclosure is made, even if the issuer appeals to the Listings Qualifications Panel, as provided for under Marketplace Rule 4820. If an issuer fails to make the public announcement by the time the Listing Qualification Panel issues its decision, that decision will also determine whether to delist an issuer's securities for failure to make the public announcement.

III. Discussion

The Commission finds the proposed rule change is consistent with the Act and the rules and regulations promulgated thereunder.[4] Specifically, the Commission finds that approval of the proposed rule change is consistent with Section 15A(b)(6) [5] of the Act. Section 15A(b)(6) [6] requires that the rules of a registered national securities association be designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, remove impediments to and perfect the mechanism of a free and open market and a national market system, and in general, protect investors and the public interest.

Specifically, the Commission finds that the proposal to amend NASD Rule 4815 to require that an issuer make a public announcement through the news media to disclose the receipt of a Staff Determination to prohibit continued listing of the issuer's securities as a result of the issuer's failure to comply with the continued listing requirements is consistent with Section 15A(b)(6) [7] because it will provide notice to investors that Nasdaq has determined to delist an issuer's securities for non-compliance with Nasdaq's continued listing requirements, and the Rules upon which the Staff Determination was based. Such information should serve to protect present and future investors in an issuer's securities by providing them with this information as promptly as possible, and not more than seven calendar days following the receipt of a Staff Determination for failure to comply with continued listing requirements. Nasdaq believes, and the Commission agrees, that requiring public announcement of this information as promptly as possible, but not more than seven calendar days from receipt of the Staff Determination, allows a reasonable timeframe for the issuer to prepare an announcement, while ensuring that investors receive the information in a timely manner. The Commission believes that investors should have the benefit of knowing that an issuer has failed to meet Nasdaq's continued listing requirements and the Rules upon which the Staff Determination is based, and therefore finds the provision that trading of an issuer's securities, if an issuer fails to disclose receipt of a Staff Determination, will be halted until the disclosure is made, even if the issuer appeals to the Listing Qualifications Panel, to be reasonable and consistent with the Act. Finally, the Commission believes that the proposal should benefit investors because it will ensure that all Nasdaq issuers publicly disclose the receipt of a Staff Determination in both a timely and uniform manner, as opposed to the current situation whereby some issuers voluntarily make the disclosure while others do not.

IV. Conclusion

For the above reasons, the Commission finds that the proposed rule change is consistent with the provisions of the Act, in general, and with Section 15A(b)(6),[8] in particular.

It Is Therefore Ordered, pursuant to section 19(b)(2) of the Act,[9] that the proposed rule change (SR-NASD-00-48), be and hereby is approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[10]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  See Securities Exchange Act Release No. 43383 (September 28, 2000), 65 FR 59480.

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4.  In approving 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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[FR Doc. 00-29445 Filed 11-16-00; 8:45 am]

BILLING CODE 8010-01-M