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Notice

Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the National Association of Securities Dealers, Inc., To Revise the Fees Associated With Appeals of Nasdaq Listing Determinations

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Information about this document as published in the Federal Register.

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Start Preamble April 5, 2001.

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 March 13, 2001, the National Association of 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.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

Nasdaq filed a proposed rule change to revise the fees associated with appeals of Nasdaq listing determinations. Below is the text of the proposed rule change. Proposed new language is in italics; proposed deletions are in brackets.

* * * * *

Rule 4820. Request for Hearing

(a) No change

(b) No change

(c) Within 15 calendar days of the date of the Staff Determination, but in no event after the time of the hearing, the issuer must submit a hearing fee to The Nasdaq Stock Market, Inc., to cover the cost of holding the hearing, as follows:

(1) where consideration is on the basis of an written submission from the issuer, $[1,400] 4,000; or

(2) where consideration is on the basis of an oral hearing, whether in person or by telephone, $[2,300]5,000.

Rule 4840. Review by the Nasdaq Listing and Hearing Review Council

(a) No change

(b) The issuer may initiate the Listing Council's review of any Panel Decision by making a written request within 15 calendar days of the date of the decision. Requests for review should be addressed to the Listing Council in care of the Nasdaq Office of General Counsel. The request will not operate as a stay of the Panel Decision. Also Start Printed Page 18838within 15 calendar days of the date of the Panel Decision, the issuer must submit a fee of $[1,400]4,000 to The Nasdaq Stock Market, Inc., to cover the cost of the review. Upon receipt of the request for review and the applicable fee, the Nasdaq Office of General Counsel will make an acknowledgment of the issuer's request stating the deadline for the issuer to provide any written submissions.

(c)-(e) No change

* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In his 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

I. Purpose

Determinations by the Listing Qualifications Department or the Listing Investigations Department to limit or prohibit the initial or continued listing of an issuer's securities may be appealed by the issuer to the Listing Qualification Panel (the “Panel”) and thereafter to the Nasdaq Listing and Hearing Review Council (the “Listing Council”). The proposed rule change revises the current fee schedules for issuer requests for the review of listing determinations to both the Panel and the Listing Council to cover the costs associated with such review.

Currently, the fee for an appeal to the Panel based on a written submission from the issuer is $1,400, and the fee for an oral hearing before the Panel is $2,300. In addition, the fee for an appeal to the Listing Council is $1,400.[3] Nasdaq proposes to change the fee for an appeal to the Panel based on a written submission from the issuer to $4,000 and the fee for an oral hearing before the Panel to $5,000. In addition, Nasdaq proposes to change the fee for an appeal to the Listing Council to $4,000.

The fees associated with appeals to the Panel were last revised in 1996.[4] Since that time, there has been an increase in the various costs associated with the review process. In particular, in 1999, Nasdaq expanded the review process, in part in response to the Commission's findings, which required changes in the process of reviews and an increase in the amount of time spent by Nasdaq staff members dedicated to the review process.[5] Further, Nasdaq has identified other expenses related to the review process that are not covered by the current hearing fees.[6]

The proposed fee for an appeal to the Panel includes all costs of the Office of Listing Qualifications hearings attributable to the processing of hearing requests and the associated expenses of the Panel.[7] In addition, the proposed fee for an appeal to the Panel includes a large portion of the expenses associated with the Office of Appeals and Review,[8] and the Listing Council. The proposed fee for an appeal to the Listing Council under Marketplace Rule 4840(b) will cover the remainder of the expenses of the Office of Appeals and Review and the Listing Council, as well as the Office of General Counsel's time directly related to the appeals process.[9]

Nasdaq believes that the allocation of a large portion of the proposed fees associated with the Office of Appeals and Review and the Listing Council is appropriate because all decisions of the Panel are subject to call for review, and the Office of Appeals and Review supports the Listing Council in connection with its call for review function. Furthermore, the Listing Council sets policy applicable to all Panel decisions. For these reasons and in order to ensure that the cost for review by the Listing Council will not be so high as to effectively foreclose the opportunity for review by the Listing Council, Nasdaq believes it is appropriate to allocate a large portion of the expenses associated with the Office of Appeals and Review and the Listing Council to all issuers who request an appeal to the Panel.

2. Statutory Basis

Nasdaq believes that the proposed rule change is consistent with the provisions of section 15A(b)(5) [10] and section 15A(b)(6) [11] of the Act. The proposed rule change is consistent with section 15A(b)(5) in that it provides for the equitable allocation of reasonable dues, fees, and other charges among issuers using the Nasdaq system. Furthermore, the proposed fees are designed to ensure that the review process is revenue neutral and reflects the costs incurred by Nasdaq to process issuer requests for review. The proposed rule change is consistent with section 15A(b)(6) in that it is designed to prevent fraudulent and manipulative acts and practices as well as to protect investors and the public interest by covering the costs associated with ensuring that only qualified issuers are allowed to list or remain listed on Nasdaq.

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.

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

Nasdaq has neither solicited nor received written comments on the proposed rule change.Start Printed Page 18839

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 is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 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 inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the NASD. All submissions should refer to the File No. SR-NASD-01-17 and should be submitted by May 2, 2001.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[12]

Jonathan G. Katz,

Secretary.

End Signature End Preamble

Footnotes

3.  Pursuant to Marketplace Rule 4840(d), appeals to the Listing Council are based only on the written record unless the Listing Council exercises its discretion to hold an oral hearing. There is no additional fee for an oral hearing before the Listing Council.

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4.  See Securities Exchange Act Release No. 37088 (April 9, 1996), 61 FR 16662 (April 16, 1996). In 1999, a $1,400 fee for appeals to the Listing Council was established, which matched the fee for appeals to the Panel based only on the written record. See Securities Exchange Act Release No. 41367 (May 4, 1999), 64 FR 25942 (May 13, 1999).

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5.  See Securities Exchange Act Release No. 41367 (May 4, 1999), 64 FR 25942 (May 13, 1999).

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6.  Nasdaq represents that the other expenses relating to the review process that are not covered by the current hearing fees include: overhead, including telephones, supplies, depreciation and occupancy, computer system support, listing qualifications retention analyst and manager review, and a stipend for Panel and Listing Council members. Telephone conversation between John D. Nachmann, Senior Attorney, Office of General Counsel, Nasdaq, and Lisa Jones, Attorney, Division of Market Regulation, Commission (March 30, 2001).

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7.  The additional variable fee allocated to issuers who request oral hearings before the Panel is designed to recover the additional costs associated with such hearings; specifically, travel expenses for members of the Panel and court reporter time to maintain a transcript of these hearings.

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8.  Nasdaq has filed a proposed rule change, SR-NASD-01-02, with the Commission pursuant to Section 19(b)(3), subparagraph (f) of the Act, and Rule 19b-4 thereunder that transfers certain responsibilities of the Nasdaq Office of General Counsel regarding the review process to the Office of Appeals and Review, a new unit in the Nasdaq's Listing Qualifications Department. The Office of Appeals and Review will receive requests for review from issuers and will keep records of proceedings.

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9.  The fees proposed in this proposed rule change are designed to recover only the direct costs associated with the review process and do not include various indirect overhead costs that have been identified by Nasdaq as Senior Management, Finance, Human Resources, Administrative Services, Legal (excluding unrelated litigation and international expenses), Economic Research, NasTech and Strategic Development.

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[FR Doc. 01-8905 Filed 4-10-01; 8:45 am]

BILLING CODE 8010-01-M