Notice2024-15907
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Certain Procedures Related to the Suspension and Delisting of Acquisition Companies
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
July 19, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 139 (Friday, July 19, 2024)</title>
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[Federal Register Volume 89, Number 139 (Friday, July 19, 2024)]
[Notices]
[Pages 58807-58810]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-15907]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100538; File No. SR-NASDAQ-2024-038]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Certain Procedures Related to the Suspension and Delisting of
Acquisition Companies
July 15, 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 July 8, 2024, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange (``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 amend certain procedures related to the
suspension and delisting of Acquisition Companies. While these
amendments are effective upon filing, the Exchange has designated the
proposed amendments to be operative on October 7, 2024.
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 amend certain procedures governing the
suspension and delisting process applicable to a company whose business
plan is to complete one or more acquisitions, as described in Rule IM-
5101-2 (``Acquisition Company''), that fails to (i) complete one or
more business combinations satisfying the requirements set forth in
Listing Rule IM-5101-2(b) (``Business Combination'') within 36 months
of the effectiveness of its IPO registration statement; or (ii) meet
the requirements for initial listing following the Business
Combination. Nasdaq also proposes to limit the Hearings Panels
authority to review the Nasdaq Staff's decision in these instances to a
review for factual error only. Finally, Nasdaq also proposes to amend
Listing Rule 5810(c)(1) to clarify it without a substantive change.\3\
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\3\ The proposed rule change would eliminate certain differences
identified by NYSE between Nasdaq's process and that of the NYSE.
See Securities Exchange Act Release No. 99906 (April 4, 2024), 89 FR
25291 (April 10, 2024) (SR-NYSE-2024-18).
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Nasdaq permits the listing of an Acquisition Company only if it
meets all applicable initial listing requirements, as well as the
special requirements set forth in Listing Rule IM-5101-2 applicable
only to Acquisition Companies. Among these special requirements is the
requirement set forth in Listing Rule IM-5101-2(b) that an Acquisition
Company must complete one or more business combinations having an
aggregate fair market value of at least 80% of the value of the deposit
account (excluding any deferred underwriters fees and taxes payable on
the income earned on the deposit account) at the time of the agreement
to
[[Page 58808]]
enter into the initial combination, within 36 months of the
effectiveness of its IPO registration statement, or such shorter period
that the company specifies in its registration statement. Listing Rule
IM-5101-2 further provides that following a Business Combination, the
company must meet the requirements for initial listing on Nasdaq.
Listing Rule IM-5101-2 provides that if an Acquisition Company does
not meet the requirements for initial listing following a business
combination or does not comply with one of the requirements set forth
in Listing Rule IM-5101-2, Nasdaq will issue a Staff Delisting
Determination under Listing Rule 5810 to delist the Company's
securities. Pursuant to Listing Rule 5810(a), the Staff Delisting
Determination informs the company of the factual basis for the
determination and provides instructions regarding the Acquisition
Company's obligations to disclose the Staff Delisting Determination to
the public. In addition, pursuant to Listing Rule 5810(a)(3), the Staff
Delisting Determination informs the company: that its securities will
be suspended as of a date certain; that it has a right to request
review of the Staff Delisting Determination by a Hearings Panel; and
that a timely request for review will stay the suspension. While
Listing Rule 5815(a)(1)(B) enumerates those instances where a timely
request for review does not stay the company's suspension, those
instances do not include a Staff Delisting Determination issued when an
Acquisition Company fails to comply with the requirements of Listing
Rule IM-5101-2, and therefore a timely request for a hearing for non-
compliance with the provisions of Listing Rule IM-5101-2 currently
stays the suspension and delisting action pending the issuance of a
written panel decision.
Furthermore, Listing Rule 5815(c)(1)(A) provides that the Hearings
Panel may, where it deems appropriate grant an exception to the
continued listing standards for a period not to exceed 180 days from
the date of the Staff Delisting Determination with respect to the
deficiency for which the exception is granted. Accordingly, an
Acquisition Company that fails the requirements in Listing Rule IM-
5101-2 to complete a business combination within 36 months or to meet
the initial listing requirements following a Business Combination may
request a review of a Staff Delisting Determination and seek an
exception to the requirements from the Hearings Panel, and could remain
listed and trading on Nasdaq pursuant to an exception granted by the
Panel.
Nasdaq proposes to amend Rule 5815 to remove the stay provision in
the situations described above so that an Acquisition Company's
securities will be suspended from trading on Nasdaq during the pendency
of the Hearings Panel's review. Specifically, Nasdaq proposes to amend
Listing Rule 5815(a)(1)(B)(ii) to provide that notwithstanding the
general rule that a timely request for a hearing shall ordinarily stay
the suspension and delisting action pending the issuance of a written
panel decision, a request for a hearing shall not stay the suspension
of the securities from trading where the matter relates to a request
made by an Acquisition Company that: (i) failed to complete one or more
business combinations satisfying the requirements set forth in Listing
Rule IM-5101-2(b) within 36 months of the effectiveness of its IPO
registration statement; or (ii) failed to meet the initial listing
requirements following a Business Combination.\4\ This proposal is
consistent with the rules of the NYSE.\5\
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\4\ The existing part of the rule that provides that a stay is
not available to an Acquisition Company that qualified for listing
pursuant to the alternative initial listing requirements in Rule
5406 and that fails to meet the continued listing requirement in
Rule 5452(a)(1) would remain and is unchanged by this proposed rule
change.
\5\ See Sections 102.06 and 802.01 of the NYSE Listed Company
Manual.
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In addition, while Hearings Panels currently have the ability to
grant an exception to an Acquisition Company that failed to (i)
complete one or more business combinations satisfying the requirements
set forth in Listing Rule IM-5101-2(b) within 36 months of the
effectiveness of its IPO registration statement; or (ii) meet the
requirements for initial listing following the Business Combination,
Nasdaq staff has observed that this allows Acquisition Companies to use
the additional time afforded by the administrative process set forth in
Listing Rule 5815 to regain compliance with the requirements by either
completing a Business Acquisition (in the case of failing to complete a
Business Acquisition) or by using the benefits of Nasdaq listing and
trading to achieve compliance with the initial listing requirements it
did not satisfy. Nasdaq believes it would enhance investor protection
to instead provide that the Hearings Panel's review of these issues is
limited to the question of whether Nasdaq Staff made a factual error
applying the applicable rule. Accordingly, Nasdaq proposes to adopt a
new Listing Rule 5815(c)(1)(H) providing that when the Hearings Panel
review is of a Staff Delisting Determination issued for failure to (i)
complete one or more business combinations satisfying the requirements
set forth in Listing Rule IM-5101-2(b) and Listing Rule 5452(a)(3)
within 36 months of the effectiveness of its IPO registration
statement; or (ii) meet the requirements for initial listing following
the Business Combination, the Hearings Panel may only reverse a
delisting decision where the Hearings Panel determines that the Staff
Delisting Determination letter was in error and that the Acquisition
Company never failed to satisfy the requirement. In such cases, the
Hearings Panel may not consider facts indicating that the company had
regained compliance since the Staff Delisting Determination, nor may
the Hearings Panel grant an exception allowing the company additional
time to regain compliance. Of course if such a company completes a
business combination after receiving a Staff Delisting Determination
and/or demonstrates compliance with all applicable initial listing
requirements, the combined Company could apply to list pursuant to the
normal application review process.
Finally, Listing Rule 5810(c)(1) contains a list of deficiencies
that immediately result in a Staff Delisting Determination. Nasdaq
proposes to amend Listing Rule 5810(c)(1) to include on this list
instances where an Acquisition Company fails to comply with one or more
of the requirements set forth in Rule IM-5101-2, including, without
limitation, a failure to complete one or more business combinations
satisfying the requirements set forth in Rule IM-5101-2(b) within 36
months of the effectiveness of its IPO registration statement or a
failure to meet the requirements for initial listing following a
business combination as described in Rule IM-5101-2(d) and (e), are
subject to immediate suspension and delisting. This proposed amendment
to Listing Rule 5810(c)(1) does not change the deficiency
administration process for an Acquisition Company in these
circumstances because, as described above, Listing Rule IM-5101-2
already dictates this outcome by requiring an issuance of a Staff
Delisting Determination. Nasdaq believes that this proposed rule change
provides additional transparency and improves the readability of the
rules without changing the substance of the rules.
Nasdaq will make the proposed rule changes described herein
operative for Staff Delisting Determination letters based on a failure
to satisfy IM-5101-2 issued on or after October 7, 2024. To
[[Page 58809]]
that end, Nasdaq proposes to renumber current Listing Rule
5815(a)(1)(B)(ii)c. to Rule 5815(a)(1)(B)(ii)c.1. while providing that
this rule applies in the case of a Staff Delisting Determination letter
issued before October 7, 2024. New Listing Rule 5815(a)(1)(B)(ii)c.2.
implements the changes described above and will provide that it applies
in the case of a Staff Delisting Determination letter issued on or
after October 7, 2024. This delayed implementation will allow
Acquisition Companies time to adjust to the new rules. The delayed
implementation will also allow any Acquisition Company that has already
received a Staff Delisting Determination letter, or that is expecting
one in the near term, to continue under the prior process for which
they may have planned.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\7\ 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.
Specifically, Nasdaq believes that the proposal to amend Listing Rule
5815(a)(1)(B)(ii) to provide that a hearing request shall not stay the
suspension of the securities from trading when the request is made by
an Acquisition Company that (i) failed to complete one or more business
combinations satisfying the requirements set forth in Listing Rule IM-
5101-2(b) within 36 months of the effectiveness of its IPO registration
statement or (ii) failed to meet the initial listing requirements
following a Business Combination is designed to protect investors and
the public interest. In particular, this change will prevent continued
trading in such company's securities until an independent Hearings
Panel reviews the Staff Delisting Determination and determines that
continued trading on Nasdaq is appropriate, and will prevent a company
from using the benefits of Nasdaq listing and trading to achieve
compliance with the requirement to complete a Business Combination or
with the initial listing requirements the company did not satisfy
following a Business Combination.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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Nasdaq also believes that limiting the scope of a Hearings Panel
discretion, in these circumstances, to reverse a delisting decision
only where the Hearings Panel determines that the Staff Delisting
Determination letter was in error, is appropriate in light of the need
to provide transparency and protect prospective investors. The
requirement to complete a business combination within 36 months is an
investor protection embedded in Listing Rule IM-5101, and the
calculation of whether a company complied with that requirement is
strictly a factual question. Similarly, the question of whether a
Business Combination failed to meet the initial listing requirements is
a factual question and limiting the matter before the Hearings Panel to
that question, along with the other changes described herein, will
prevent a company from using the benefits of Nasdaq listing and trading
to achieve compliance with the initial listing requirements it did not
satisfy, just like any other previously unlisted company. Moreover,
investors in the Acquisition Company and Business Combination continue
to be protected because the Business Combination can still submit a new
application for initial listing on Nasdaq at any point that it does
satisfy all initial listing requirements, notwithstanding the proposed
inability of the Panel to grant an exception to allow the company
additional time to meet the initial listing requirements.
In addition, Nasdaq believes that the proposed rule change is
consistent with Section 6(b)(7) of the Act, which requires, among other
things, that the rules of a national securities exchange provide a fair
procedure for the prohibition or limitation by the exchange of any
person with respect to access to services offered by the exchange,
because following the proposed change an Acquisition Company would be
able to request a review of the Staff Delisting Determination letter by
an independent Hearings Panel and because the Hearings Panel will have
the authority to reverse a delisting decision where the Hearings Panel
determines that the Staff Delisting Determination letter was in error.
Finally, Nasdaq believes that a proposal to amend Listing Rule
5810(c)(1) to provide that securities of an Acquisition Company that
fails to comply with one or more of the requirements set forth in Rule
IM-5101-2, including, without limitation, a failure to complete one or
more business combinations satisfying the requirements set forth in
Rule IM-5101-2(b) within 36 months of the effectiveness of its IPO
registration statement or a failure to meet the requirements for
initial listing following a business combination as described in Rule
IM-5101-2(d) and (e), are subject to immediate suspension and
delisting, is designed to remove impediments to and perfect the
mechanism of a free and open market because this change provides
transparency and improves the readability of the rules without changing
their substance.
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 rule would be
applied equally to all Acquisition Companies. In addition, the proposed
rule change will align the process for suspension and delisting of an
Acquisition Company in the circumstances described above with that of
the NYSE.\8\
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\8\ See Sections 102.06 and 802.01 of the NYSE Listed Company
Manual. See also footnote 3, supra.
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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) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 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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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
[[Page 58810]]
to determine whether the proposed rule change 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="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#641611080149070b0909010a1017241701074a030b12"><span class="__cf_email__" data-cfemail="f88a8d949dd59b9795959d968c8bb88b9d9bd69f978e">[email protected]</span></a>. Please include
file number SR-NASDAQ-2024-038 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-2024-038. 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-2024-038 and should
be submitted on or before August 9, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-15907 Filed 7-18-24; 8:45 am]
BILLING CODE 8011-01-P
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