

[Federal Register: June 12, 2007 (Volume 72, Number 112)]
[Notices]               
[Page 32383-32384]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12jn07-82]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55856; File No. SR-NASDAQ-2007-029]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Approving a Proposed Rule Change, as Modified by Amendment No. 1, To 
Require Nasdaq-Listed Issuers To Submit Material News to Nasdaq Using 
Nasdaq's Electronic Disclosure Submission System

June 4, 2007.

I. Introduction

    On March 27, 2007, The NASDAQ Stock Market LLC (``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 
require Nasdaq-listed issuers to submit material news to Nasdaq through 
Nasdaq's electronic disclosure submission system, except in emergency 
situations. Nasdaq filed Amendment No. 1 to the proposal on April 25, 
2007. The proposed rule change, as amended, was published for comment 
in the Federal Register on May 2, 2007.\3\ The Commission received no 
comments regarding the proposed rule change, as amended. This order 
approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 55672 (April 26, 
2007), 72 FR 24349.
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II. Description of the Proposal

    Nasdaq Rules 4310(c)(16) and 4320(e)(14) require a Nasdaq-listed 
issuer, except in unusual circumstances, to make prompt disclosure to 
the public through any Regulation FD compliant method (or combination 
of methods) of any material information that would reasonably be 
expected to affect the value of its securities or to influence 
investors' decisions. These rules also require the issuer to provide 
notice of certain disclosures to Nasdaq's MarketWatch Department 
(``Nasdaq MarketWatch'') prior to the release of the information. 
Nasdaq reviews these disclosures to determine whether a trading halt is 
appropriate. Issuers currently provide material news notifications to 
Nasdaq MarketWatch electronically through Nasdaq's electronic 
disclosure submission system, or via fax or telephone. Nasdaq does not 
disseminate this information.
    Although Nasdaq introduced the electronic disclosure submission 
system in 2004, most issuers continue to provide material news 
notifications to Nasdaq MarketWatch by fax.\4\ According to Nasdaq, the 
material information from fax-delivered documents and telephone 
notifications must be retyped manually into Nasdaq MarketWatch's 
database systems, a process that uses staff time, introduces error 
risk, and results in a less robust audit trail. To reduce this 
administrative burden, Nasdaq proposes to amend Nasdaq Rule 4120, 
``Trading Halts,'' and IM-4120-1, ``Disclosure of Material 
Information,'' to require issuers to submit material news notifications 
to Nasdaq through Nasdaq's electronic disclosure submission system, 
except in emergency situations.\5\ In an emergency, an issuer would 
continue to be required to notify Nasdaq prior to disseminating 
material news, but Nasdaq would accept notification by telephone or 
fax.
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    \4\ Nasdaq notes, for example, that of approximately 4,200 
material news notifications submitted to Nasdaq MarketWatch in 
January 2007, over 70% were submitted by fax.
    \5\ Nasdaq defines emergency situations to include: lack of 
computer or internet access; a technical problem on either the 
issuer or Nasdaq system, or an incompatibility between those 
systems; and a material development such that no draft disclosure 
document exists, but immediate notification to Nasdaq MarketWatch is 
important based on the event. See Nasdaq IM-4120-1.
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    Under the proposal, Nasdaq may issue a Staff Determination that is 
a public reprimand letter or, in extreme circumstances, a Staff 
Determination to delist an issuer's securities, if an issuer repeatedly 
fails to notify Nasdaq prior to the distribution of material news, or 
repeatedly fails to use the electronic disclosure submission system in 
the absence of an emergency.\6\ In determining whether to issue a 
public reprimand letter, Nasdaq will consider whether the issuer has 
demonstrated a pattern of failures, whether the issuer has been 
contacted concerning previous violations, and whether the issuer has 
taken steps to assure that future violations will not occur.\7\
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    \6\ See Nasdaq IM-4120-1.
    \7\ See Nasdaq IM-4120-1.
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    Nasdaq proposes to implement the proposal approximately 90 days 
after the proposal is approved.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with

[[Page 32384]]

the requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\8\ Specifically, the 
Commission finds that the proposal is consistent with Section 6(b)(5) 
of the Act,\9\ which requires, among other things, that the rules of a 
national securities exchange be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, 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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    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
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    By requiring issuers to submit material news notifications to 
Nasdaq through Nasdaq's electronic disclosure submission system, except 
in emergencies, the Commission believes that the proposal appears to be 
reasonably designed to reduce the administrative burdens and error risk 
associated with retyping material news information provided by 
telephone or fax into Nasdaq's database systems. By reducing the error 
risk associated with retyping this information into Nasdaq's database 
systems, the Commission also believes that the proposal appears to be 
reasonably designed to help to enhance the accuracy and integrity of 
Nasdaq's audit trail.
    Under the proposal, Nasdaq may issue a Staff Determination that is 
a public reprimand letter or, in extreme circumstances, a determination 
to delist an issuer's securities, if an issuer fails repeatedly to 
notify Nasdaq prior to the distribution of material news or fails 
repeatedly to use the electronic disclosure submission system in the 
absence of an emergency.\10\ The Commission notes that the procedures 
in the Nasdaq Rule 4800 Series, ``Procedures for Review of Nasdaq 
Listing Determinations,'' will apply to any such Staff Determinations.
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    \10\ See Nasdaq IM-4120-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-NASDAQ-2007-029), as 
amended, is approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-11189 Filed 6-11-07; 8:45 am]

BILLING CODE 8010-01-P
