Daily Rules, Proposed Rules, and Notices of the Federal Government
Before an issuer lists its securities on the Exchange for trading, the issuer and the securities must meet the Exchange's initial listing standards.
In addition to the quantitative and corporate governance listing standards, Nasdaq Rule 5101 also gives the Exchange discretion to deny listing or continued listing based on any event or condition that makes such listing or continued listing inadvisable or unwarranted, even though the securities meet all enumerated standards.
Nasdaq rules provide that when a listed issuer does not meet the Exchange's continued listing standards, Nasdaq would immediately notify the issuer of the deficiency.
Currently, the Exchange's rules require the listed issuer, after receiving a Nasdaq Staff Determination, to make a public announcement by filing a Form 8-K when required by Commission rules or by issuing a press release disclosing receipt of the Nasdaq Staff Determination and the Exchange rules upon which the deficiency is based.
In its proposal, the Exchange stated that some issuers comply with this
The Exchange proposes to change its rules in several ways to address this issue. First, the Exchange would require issuers to disclose each specific basis and concern cited by Nasdaq in the Nasdaq Staff Determination.
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
The development and enforcement of meaningful listing standards for an exchange is of substantial importance to financial markets and the investing public. Among other things, listing standards provide the means for an exchange to screen issuers that seek to become listed and to provide listed status only to those that are bona fide issuers with sufficient public float, investor base, and trading interest likely to generate depth and liquidity sufficient to promote fair and orderly markets. Meaningful listing standards also are important given investor expectations regarding the nature of securities that have achieved an exchange listing, and the role of an exchange in overseeing its market, assuring compliance with its listing standards and detecting and deterring manipulative trading activity.
The Commission finds that the proposed rule change is consistent with the requirements of the Act. The proposal would require an issuer, after receipt of a notification of deficiency of the Exchange's continued listing standards, to issue more detailed public announcements on the concerns identified in the Exchange's determination. Currently, issuers are required to disclose receipt of the notification and the Exchange rule(s) upon which the deficiency is based. As the Exchange noted, in certain instances such disclosure is inadequate. For example, some delisting notifications are based on the Exchange exercising its public interest authority pursuant to Exchange Rule 5101. Mere disclosure of the Exchange rule number would not provide investors with the necessary information as to the reasons behind the Exchange's deficiency determination. The Commission believes that this proposal should provide investors with additional important information on the listed issuer in order to help investors make informed trading decisions.
As noted above, the Exchange's rules give listed issuers the right to appeal a delisting determination or public reprimand letter.
In addition, as described above, Nasdaq's proposal also specifically states that in its public announcement, a listed issuer can provide its own analysis of the issues raised in a staff delisting determination. While the Commission notes that the appropriate forum for appealing a delisting determination is within the adjudicatory process provided in the Exchange's rules and this provision should not be used as a way to litigate the issues through the public announcement, the proposed rule simply reflects that issuers may currently make public announcements for a variety of reasons. In the event that an issuer discloses inaccurate or misleading analysis, the Exchange represented that the Exchange could use the new authority in proposed Nasdaq Rule 5840(l), as discussed below, to issue an Exchange clarifying public announcement.
The Commission also finds that the proposed changes that would allow the Exchange to make an issuer's required public announcement about a Nasdaq Staff Determination should the issuer fail to do so within the time allotted or if the announcement does not contain all the required information are consistent with the requirements of the Act. The Commission notes that, for the same reasons noted above, it is important that there is adequate notification of a Nasdaq Staff Determination to investors and the public. Therefore, if the issuer fails to make the required disclosure the Exchange will have the authority to do so. The Commission notes that the proposal is similar to the rules of another national securities exchange.
Finally, the Commission believes that the proposed new provision that gives the Exchange the authority to make a public announcement involving an issuer's listing or trading on Nasdaq at any level of a proceeding under its Rule 5800 Series in order to maintain the quality of and public confidence in its markets and to protect investors and the public interest is consistent with the Act. For example, the Exchange could use this authority to counter any inaccurate or misleading statements in an issuer's own public announcement with respect to the issuer's delisting. The Commission also believes that this authority could be useful in those situations, as noted by Nasdaq in its filing, where an issuer is trading in the over-the-counter market pending its delisting appeal and does not make its own announcement when the appeal is finally denied. In such a situation, Nasdaq could use its authority to make such an announcement. In both situations noted above, allowing the Exchange to make a public announcement if there is a lack of accurate public information concerning a Nasdaq Staff Determination would be important for investors and the public interest consistent with Section 6(b)(5) of the Act.
It is therefore ordered that, pursuant to Section 19(b)(2) of the Act,