[Federal Register Volume 87, Number 200 (Tuesday, October 18, 2022)]
[Notices]
[Pages 63113-63115]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22555]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96042; File No. SR-NASDAQ-2022-055]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend Nasdaq's Program Providing Eligible Companies With Complimentary 
Board Recruiting Services

October 12, 2022.
    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 October 4, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend Nasdaq's program providing Eligible 
Companies with complimentary board recruiting services.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Exchange 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. The Exchange 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

1. Purpose
    Nasdaq is proposing to extend its program, described in IM-5900-9, 
providing Eligible Companies \3\ with complimentary board recruiting 
services. The rule currently requires Eligible Companies to request 
services by December 1, 2022; as revised that deadline would be 
extended to December 1, 2023. Nasdaq also proposes to make clarifying 
changes to reflect the approval of Rule 5605(f).
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    \3\ Under Nasdaq Rule IM-5900-9, an Eligible Company is:
    (a) any listed Company, except as described below, that 
represents to Nasdaq that it does not have (i) at least one director 
who self-identifies as female; and (ii) at least one director who 
self-identifies as one or more of the following: Black or African 
American, Hispanic or Latinx, Asian, Native American or Alaska 
Native, Native Hawaiian or Pacific Islander, or Two or More Races or 
Ethnicities, or who self-identifies as lesbian, gay, bisexual, 
transgender or as a member of the queer community;
    (b) a listed Company that (i) is a Foreign Private Issuer (as 
defined in Rule 5005(a)(19), or (ii) is considered a foreign issuer 
under Rule 3b-4(b) under the Act and has its principal executive 
offices located outside of the United States, if it represents to 
Nasdaq that it does not have (i) at least one director who self-
identifies as female; and (ii) at least one director who self-
identifies as one or more of the following: female, an 
underrepresented individual based on national, racial, ethnic, 
indigenous, cultural, religious or linguistic identity in the 
country of the company's principal executive offices, or lesbian, 
gay, bisexual, transgender or as a member of the queer community; or
    (c) a listed Company that is a Smaller Reporting Company (as 
defined in Rule 12b-2 under the Act), if it represents to Nasdaq 
that it does not have (i) at least one director who self-identifies 
as female, and (ii) at least one director who self-identifies as one 
or more of the following: female, Black or African American, 
Hispanic or Latinx, Asian, Native American or Alaska Native, Native 
Hawaiian or Pacific Islander, or Two or More Races or Ethnicities, 
or who self-identifies as lesbian, gay, bisexual, transgender or as 
a member of the queer community.
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    Under IM-5900-9,\4\ Nasdaq provides Eligible Companies with one 
year of complimentary access for two users to a board recruiting 
service, which provides access to a network of board-ready diverse 
candidates for companies to identify and evaluate. Nasdaq believes that 
offering this board recruiting solution assists and encourages listed 
companies to increase diverse representation on their boards, which can 
result in improved corporate governance, thus strengthening the 
integrity of the market and building investor confidence.
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    \4\ Securities Exchange Act Release No. 92590 (August 6, 2021), 
86 FR 44424 (August 12, 2021) (SR-NASDAQ-2020-082).
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    Currently, Eligible Companies may request the board recruiting 
complimentary service on or before December 1, 2022. After evaluating 
the service and progress made in enhancing diversity, Nasdaq proposes 
to extend the program until December 1, 2023. Under Nasdaq Rule 
5605(f)(7), the earliest that a Nasdaq listed company will need to 
explain why it does not have at least one Diverse \5\ director, is 
August 6, 2023; and the earliest it will have to explain why it does 
not have at least two Diverse directors is August 6, 2025.\6\ As such, 
Nasdaq believes it continues to be appropriate to offer the 
complimentary board recruiting service to Eligible Companies.
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    \5\ Nasdaq Rule 5605(f)(1) provides the definition of 
``Diverse''. ``Diverse'' means an individual who self-identifies in 
one or more of the following categories: Female, Underrepresented 
Minority, or LGBTQ+. ``Female'' means an individual who self-
identifies her gender as a woman, without regard to the individual's 
designated sex at birth.
    \6\ Nasdaq Rule 5065(f)(7)(A).
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    In addition, Nasdaq proposes to update the reference in Nasdaq Rule 
IM-5900-9 to Nasdaq's proposed rule contained in SR-Nasdaq-2020-081, as 
it pertains to the Diverse Board Representation, to instead reference 
the approved Nasdaq Rule 5605(f). This change is non-substantive, and 
clarifies the rules.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed 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. 
It is also consistent with this provision because it is not designed to 
permit unfair discrimination between issuers. Nasdaq also believes that 
the proposed rule change is consistent with the provisions of Sections 
6(b)(4) \9\ and 6(b)(8),\10\ in that the proposal is designed, among 
other things, to provide for the equitable allocation of reasonable 
dues, fees, and other charges among Exchange members and issuers and 
other persons using its facilities and that the rules of the Exchange 
do not impose any burden on competition not

[[Page 63114]]

necessary or appropriate in furtherance of the purposes of the Exchange 
Act.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(4).
    \10\ 15 U.S.C. 78f(8).
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    Nasdaq believes that research surrounding the value of diversity on 
a company's board and investor interest in more diverse boards \11\ 
supports the fact that the proposal to offer access to a board 
recruiting solution promotes just and equitable principles of trade and 
protects investors and the public interest. Nasdaq believes that by 
making this service available for a longer duration, more companies 
will seek to enhance the diversity of their boards to achieve these 
benefits. However, no company is required to use this service. Nasdaq 
believes it is reasonable, and not unfairly discriminatory, to offer 
the board recruiting solution only to Eligible Companies because these 
companies have the greatest need to identify diverse board candidates. 
They will need to identify diverse board candidates if they wish to 
satisfy that requirement instead of explaining why they do not satisfy 
it. Further, Nasdaq believes that companies that already have two 
Diverse directors will already be familiar with the benefits of board 
diversity and have demonstrated that they do not need Nasdaq's 
assistance in identifying diverse candidates.
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    \11\ Securities Exchange Act Release No. 92590 (August 6, 2021), 
86 FR 44424 (August 12, 2021) (SR-NASDAQ-2020-082).
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    Under Nasdaq Rule 5605(f), companies will have until August 6, 2023 
to have, or explain why they do not have, at least one Diverse director 
and until August 6, 2025 to have, or explain why they do not have, at 
least two Diverse directors. Some Eligible Companies have already 
requested the service, other Eligible Companies may first use an 
alternate approach to identify a Diverse director. Therefore, to 
provide Eligible Companies with adequate time to determine whether to 
utilize the complimentary service before they first need to comply with 
Nasdaq Rule 5605(f), Nasdaq believes it is reasonable to extend the 
expiration date until December 1, 2023 to begin using the service.
    Nasdaq faces competition in the market for listing services,\12\ 
and competes, in part, by offering valuable services to companies. 
Nasdaq believes that it is reasonable to continue to offer this 
complimentary service as a tool to attract and retain listings as part 
of this competition. In particular, Nasdaq believes some companies will 
view the proposed board recruiting solution as a valuable tool to help 
achieve diversity, to the potential benefit of the company and its 
investors. Nasdaq also believes that offering this complimentary 
service will help it compete to attract and retain listings in light of 
the additional requirements contained in Rule 5065(f).
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    \12\ The Justice Department has noted the intense competitive 
environment for exchange listings. See ``NASDAQ OMX Group Inc. and 
Intercontinental Exchange Inc. Abandon Their Proposed Acquisition Of 
NYSE Euronext After Justice Department Threatens Lawsuit'' (May 16, 
2011), available at http://www.justice.gov/atr/public/press_releases/2011/271214.htm.
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    For these reasons, Nasdaq believes it is not an inequitable 
allocation of fees, unfairly discriminatory, nor an unnecessary or 
inappropriate burden on competition to continue to extend the offer of 
board recruiting solution only to Eligible Companies until December 1, 
2023. Nasdaq represents that individual listed companies are not given 
specially negotiated packages of products or services to list, or 
remain listed, which the Commission has previously stated would raise 
unfair discrimination issues under the Exchange Act.\13\
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    \13\ See Exchange Act Release No. 79366, 81 FR 85663 at 85665 
(citing Securities Exchange Act Release No. 65127 (August 12, 2011), 
76 FR 51449, 51452 (August 18, 2011) (approving NYSE-2011-20)).
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    In addition, the proposal to reflect the approval of SR-Nasdaq-
2020-081, and to directly reference the now-approved Nasdaq Rule 
5605(f), is non-substantive, and simply clarifies the rules. The 
Exchange believes that this is consistent with Section 6(b) of the 
Act,\14\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act.\15\
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    \14\ Ibid 9.
    \15\ Ibid 10.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. As noted above, Nasdaq faces 
competition in the market for listing services, and competes, in part, 
by offering valuable services to companies. The proposed rule change 
reflects competition, but does not impose any burden on the competition 
with other exchanges. Rather, Nasdaq believes that some companies will 
find the proposed board recruiting solution an attractive offering and 
therefore make listing or remaining listed on Nasdaq more attractive, 
which will enhance competition for listings.
    Other exchanges can also offer similar services to companies, 
thereby increasing competition to the benefit of those companies and 
their shareholders. Accordingly, Nasdaq does not believe the proposed 
rule change will impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Exchange Act.
    In addition, the proposal to reflect the approval of Nasdaq Rule 
5605(f), is non-substantive, and simply aligns the rules in a clear and 
consistent manner. Nasdaq does not believe this change will impose any 
burden on competition.

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

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \16\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2022-055 on the subject line.

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Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2022-055. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2022-055 and should be submitted 
on or before November 8, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22555 Filed 10-17-22; 8:45 am]
BILLING CODE 8011-01-P


