Notice2024-05833
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Clarify Its Listing Standards Related to Notification and Disclosure of Reverse Stock Splits
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 20, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 55 (Wednesday, March 20, 2024)</title>
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[Federal Register Volume 89, Number 55 (Wednesday, March 20, 2024)]
[Notices]
[Pages 19905-19907]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-05833]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99734; File No. SR-NASDAQ-2024-010]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Clarify Its Listing Standards Related to Notification and Disclosure of
Reverse Stock Splits
March 14, 2024.
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 March 1, 2024, 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 and II 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 clarify its listing standards related to
notification and disclosure of reverse stock splits.
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
On June 21, 2023, Nasdaq filed with the Commission a proposed rule
change related to notification and disclosure of reverse stock
splits.\3\ On November 1, 2023, the Commission approved the proposed
rule changes.\4\ Nasdaq is proposing to amend Rule IM-5250-3 without
changing the substance of the rule. Nasdaq also is proposing an
additional change to the Company Event Notification Form to further
clarify the requirement for companies to submit a complete form.
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\3\ See Securities Exchange Act Release No. 98014 (July 28,
2023), 88 FR 51376 (August 3, 2023).
\4\ See Securities Exchange Act Release No. 98843 (November 1,
2023), 88 FR 76867 (November 7, 2023).
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Nasdaq Rule 5250(e)(7) already provides that if a company takes
legal action to effect a reverse stock split notwithstanding its
failure to timely satisfy the requirements of Rules 5250(b)(4) and
(e)(7), or provides incomplete or inaccurate information about the
timing or ratio of the reverse stock split in its public disclosure,
Nasdaq will halt the stock in accordance with the procedure set forth
in Equity 4, Rule 4120(a)(1).\5\ Nasdaq IM-5250-3
[[Page 19906]]
contains similar language, but does not specifically reference the halt
authority in in Equity 4, Rule 4120(a)(1). Nasdaq now proposes to
clarify in IM-5250-3 by including a reference to the halt procedure set
forth in Equity 4, Rule 4120(a)(1).
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\5\ Equity 4, Rule 4120(a)(1) provides Nasdaq with the authority
to halt trading to permit the dissemination of material news under
Equity 4, Rule 4120(a)(1). Equity 4, 4120(a)(14) provides Nasdaq
with the authority to halt trading of a security for which Nasdaq is
the Primary Listing Market before the end of Post-Market Hours on
the day immediately before the market effective date of a reverse
stock split.
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Nasdaq is also attaching an updated Company Event Notification Form
as Exhibit 3 to the rule filing. Based on Nasdaq's experience to date
with company filings under the rule, Nasdaq is making changes to the
form to clarify that the company must have already obtained a new CUSIP
number and that CUSIP number must be made eligible by DTC before the
submission of the form. Nasdaq also is making minor wording changes to
clarify that shareholder approval must be obtained (as opposed to be
planned) before the form can be submitted, similar to other dates
collected on the form such as the date that DTC made the new CUSIP
eligible.\6\ These changes are consistent with the existing
requirements of Rule 5250(e)(7), which requires the company to submit a
complete Company Event Notification Form no later than 12:00 p.m. ET
five (5) business days prior to the proposed market effective date, and
which provides that Nasdaq will not process a reverse stock split
unless all information required by the form is timely provided.
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\6\ We are also making some minor typographical edits in the
Corporate Events Notification Form, that do not change the substance
of the rule.
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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,
by eliminating potential confusion and enhancing clarity and
transparency in its rules. The proposal is consistent with the
Exchange's original proposal, as approved by the Commission, and does
not have any substantive effect on IM-5250-3.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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The proposal intends to clarify that Nasdaq will use its material
news halt under Equity 4, Rule 4120(a)(1) to halt trading in the
security of any issuer that effects a reverse stock split without
meeting the requirements set forth in Rules 5250(b)(4) and (e)(7).
Nasdaq believes that this will help promote clarity, transparency and
consistency for market participants and companies.
The proposal also intends to clarify on the Company Event
Notification Form that a company must file a complete Company Event
Notification Form no later than 12:00 p.m. ET five (5) business days
prior to the proposed market effective date, and such submission must
include all the relevant information required by the form. Nasdaq
believes that these changes will memorialize changes to our current
process and better reflect the original intent of the rule, which will
in turn help promote clarity, transparency and consistency for
companies submitting the form.
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. The proposed change is designed
to more clearly describe the current operation and original intent of
an existing rule and related Company Event Notification Form, without
changing its substance and, therefore, Nasdaq believes that the
proposed change will not impose a 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
The Exchange has filed the proposed rule change pursuant to section
19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\
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 \11\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\12\
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(6).
\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of 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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A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\14\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange asked
that the Commission waive the 30 day operative delay so that the
proposal may become operative immediately upon filing and states that
the waiver will allow it to reflect the Exchange's original intent and
reduce potential confusion for companies and investors. As the proposed
rule change raises no new or novel issues and promotes clarity and
consistency with the original intent of Rule IM-5250-3, the Commission
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest. Accordingly, the
Commission hereby waives the 30-day operative delay and designates the
proposed rule change as operative upon filing.\15\
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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:
[[Page 19907]]
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#81f3f4ede4ace2eeecece4eff5f2c1f2e4e2afe6eef7"><span class="__cf_email__" data-cfemail="90e2e5fcf5bdf3fffdfdf5fee4e3d0e3f5f3bef7ffe6">[email protected]</span></a>. Please include
file number SR-NASDAQ-2024-010 on the subject line.
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-2024-010. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NASDAQ-2024-010 and should
be submitted on or before April 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-05833 Filed 3-19-24; 8:45 am]
BILLING CODE 8011-01-P
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