Daily Rules, Proposed Rules, and Notices of the Federal Government
Nasdaq proposes to modify certain disclosure requirements surrounding a company's non-compliance with the listing rules. Nasdaq will implement the proposed rule upon approval.
The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in brackets.
(a) No change.
(1) No change.
As set forth in Rule 5810(b)
(c)-(f) No change.
When the Listing Qualifications Department determines that a Company does not meet a listing standard set forth in the Rule 5000 Series, it will immediately notify the Company of the deficiency. As explained in more detail below, deficiency notifications are of four types:
(1) Staff Delisting Determinations, which are notifications of deficiencies that, unless appealed, subject the Company to immediate suspension and delisting;
(2) Notifications of deficiencies for which a Company may submit a plan of compliance for staff review;
(3) Notifications of deficiencies for which a Company is entitled to an automatic cure or compliance period; and
(4) Public Reprimand Letters.
Notifications of deficiencies that allow for submission of a compliance plan or an automatic cure or compliance period may result, after review of the compliance plan or expiration of the cure or compliance period, in issuance of a Staff Delisting Determination or a Public Reprimand Letter.
(a) No change.
A Company that receives a notification of deficiency, Staff Delisting Determination, or Public Reprimand Letter is required to make a public announcement disclosing receipt of the notification and the Rule(s) upon which the deficiency is based
As described in Rule 5250(b)(1) and IM-5250-1, the Company must notify Nasdaq's MarketWatch Department about the announcement through the electronic disclosure submission system available at
Rule 5810(b) requires that a Company make a public announcement by filing a Form 8-K, where required by SEC rules, or by issuing a press release disclosing the receipt of (i) a notice that the Company does not meet a listing standard set forth in the Rule 5000 Series, (ii) a Staff Delisting Determination to limit or prohibit continued listing of the Company's securities under Rule 5810 as a result of the Company's failure to comply with the continued listing requirements, or (iii) a Public Reprimand Letter; provided, however, that if the notification relates to a failure to meet the requirements of Rules 5250(c)(1) or (2), the Company must make the public announcement by issuing a press release. Such public announcement shall be made as promptly as possible, but not more than four business days following the receipt of the notification, Staff Delisting Determination, or Public Reprimand Letter, as applicable.
If the public announcement is not made by the Company within the time allotted
Rule 5810(b) does not relieve a Company of its disclosure obligation under the federal securities laws, nor should it be construed as providing a safe harbor under the federal securities laws. It is suggested that the Company consult with corporate/securities counsel in assessing its disclosure obligations under the federal securities laws.
(c) No change.
IM-5810-2. No change.
(d) No change.
(a)-(k) No change.
In its 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.
Nasdaq rules require that a company that receives a Staff Delisting Determination, Public Reprimand Letter or a notice that the company does not meet a listing standard (collectively, a "Staff Determination") make a public announcement, either by filing a Form 8-K, where required by SEC rules, or by issuing a press release disclosing its receipt of the notification.
Nasdaq's intent in adopting this requirement was to ensure that the public is provided with adequate information whenever a company is deficient under Nasdaq's rules. However, Nasdaq has observed that some companies merely disclose the rule number and a description of the rule, without providing additional disclosure to enable the public to understand the deficiency or the underlying basis for it. While this may be sufficient in most cases where the deficiency is related to a quantitative requirement, such as a bid price deficiency, it is insufficient when qualitative issues are raised. For example, a company may disclose that Nasdaq has determined to delist it for "public interest concerns under Rule 5101" without describing the nature of Nasdaq's concerns. Nasdaq believes that disclosure made without a description of the specific underlying concerns that gave rise to the delisting proceeding will prevent investors from making fully informed investment decisions. Furthermore, since the remedy for failing to make this disclosure is for Staff to halt trading in the company's securities, Nasdaq is concerned that a company that has already been halted by Staff due to regulatory concerns may decline altogether to make the required disclosure.
Accordingly, Nasdaq proposes to modify IM-5810-1 to specifically require that the company's public announcement of receipt of a Staff Determination describe each of the bases and specific concerns underlying Nasdaq's determination. The IM would also provide that the company may include its own analysis of the issues raised.
Similarly, Nasdaq also proposes to provide that it may make a public announcement, including by press release, describing an action involving a company's listing or trading on Nasdaq. This authority could be used, for example, where a company that is late in filing its periodic reports is not granted an extended stay of delisting by the Hearings Panel pursuant to Rule 5815(a)(1)(B), and is therefore trading in the over-the-counter market pending a final decision by a hearings Panel. If the Panel ultimately determines to delist this company, its securities would continue to trade in the over-the-counter market and, unless the company chose to issue its own public announcement, investors would not know that the Panel had determined to delist the Company until Nasdaq filed a Form 25 with the Commission to formally delist the Company some months later.
Nasdaq believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
A. By order approve or disapprove such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule change should be disapproved.
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:
* Use the Commission's Internet comment form (
* Send an email to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.