Notice2022-22555
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
Primary source
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Published
October 18, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 200 (Tuesday, October 18, 2022)</title>
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[Federal Register Volume 87, Number 200 (Tuesday, October 18, 2022)]
[Notices]
[Pages 63113-63115]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[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 <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules</a>, 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 <a href="http://www.justice.gov/atr/public/press_releases/2011/271214.htm">http://www.justice.gov/atr/public/press_releases/2011/271214.htm</a>.
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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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#bccec9d0d991dfd3d1d1d9d2c8cffccfd9df92dbd3ca"><span class="__cf_email__" data-cfemail="ddafa8b1b8f0beb2b0b0b8b3a9ae9daeb8bef3bab2ab">[email protected]</span></a>. Please include
File Number SR-NASDAQ-2022-055 on the subject line.
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Paper Comments
<bullet> 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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
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