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Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Granting Approval to Proposed Rule Change To Clarify the Applicability of the Nasdaq Corporate Governance Requirements During the Listing Review Process

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Start Preamble January 21, 2004.

On February 26, 2003, 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”), 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 clarify the applicability of its corporate governance requirements during the listing review process. On October 10, 2003, NASD, through Nasdaq, submitted Amendment No. 1 to the proposed rule change.[3]

The proposed rule change, as amended, was published for comment in the Federal Register on October 23, 2003.[4] The Commission received no comments on the proposal.

The proposed rule change would amend NASD Rule 4810, concerning procedures for review of Nasdaq listing Start Printed Page 3973determinations, to explicitly state that the Listing Hearing and Review Council (“Listing Council”) or the NASD Board, as part of its respective review, may consider, among other things, any action by an issuer during the review process that would have constituted a violation of Nasdaq's corporate governance requirements had the issuer's securities been listed on Nasdaq at the time.

The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to the NASD [5] and, in particular, the requirements of 15A(b)(6) of the Act [6] and the rules and regulations thereunder because it clarifies procedures for review of listing determinations. The proposed rule change is designed to place an issuer more clearly on notice that any action on its part during the review process that would constitute a violation of Nasdaq's corporate governance requirements, had the issuer's securities been listed on Nasdaq at the time, may be considered by the Listing Council or NASD Board as part of its respective review.

It is therefore ordered, pursuant to section 19(b)(2) of the Act [7] , that the proposed rule change (File No. SR-NASD-2003-23) be, and it hereby is, approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[8]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  See letter from Mary M. Dunbar, Vice President and Deputy General Counsel, to Katherine A. England, Assistant Director, Division of Market Regulation, Commission, dated October 9, 2003. Amendment No. 1 replaced the original filing in its entirety.

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4.  See Securities Exchange Act Release No. 48646 (October 16, 2003), 68 FR 60747.

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5.  In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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6.  15 U.S.C. 78 o-3(b)(6). Section 15A(b)(6) requires that the rules of a registered national securities association 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, 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.

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[FR Doc. 04-1665 Filed 1-26-04; 8:45 am]