[Federal Register Volume 59, Number 110 (Thursday, June 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14031]
[[Page Unknown]]
[Federal Register: June 9, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34151; File No. SR-NASD-94-19]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Order Approving Proposed Rule Change to Provide the NASD
With Discretionary Authority to Exclude an Issuer From the Nasdaq Stock
Market or Impose Additional or More Stringent Criteria for Inclusion in
the Nasdaq Stock Market
June 3, 1994.
I. Introduction
On April 6, 1994, the National Association of Securities Dealers,
Inc. (``NASD'' or ``Association'') filed with the Securities and
Exchange Commission (``SEC'' or ``Commission'') a proposed rule change
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4 thereunder.\2\ The rule change adds
provisions to Schedule D to the NASD By-Laws clarifying the NASD's
discretionary authority to exclude an issuer from the Nasdaq Stock
Market (``Nasdaq'') or require additional or more stringent criteria
for inclusion in Nasdaq.
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1993).
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Notice of the proposed rule change together with its terms of
substance was provided by issuance of a Commission release and by
publication in the Federal Register.\3\ Three comments were received in
response to the Commission release, one expressing general support and
two opposing the proposal. This order approves the proposed rule
change.
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\3\Securities Exchange Act Release No. 33899 (Apr. 12, 1994), 59
FR 18171 (Apr. 15, 1994).
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II. Description
According to the NASD, it submitted this rule filing primarily to
address concerns about the increasing number of applications for
inclusion in Nasdaq by companies controlled or substantially influenced
by persons with a history of securities or commodities violations.\4\
The NASD also indicated that its proposal to amend Sections 1 and 2 of
Part II to Schedule D\5\ is intended to codify certain principles
underlying Nasdaq. First, the NASD states, that as operator of Nasdaq,
it is entrusted with the authority to preserve and strengthen the
quality of and public confidence in its market. Second, Nasdaq stands
for integrity and ethical business practices in order to enhance
investor confidence, thereby continuing to the financial health of the
economy, and supporting the capital formation process. Third, inclusion
in Nasdaq carries with it an implicit expectation that all Nasdaq
issuers, from new public companies to companies of international
stature, share these objectives. The proposal further clarifies that
the NASD, in addition to applying the enumerated criteria set forth in
Parts II and III to Schedule D, may exercise broad discretionary
authority over the initial and continued inclusion of securities in
Nasdaq in order to maintain the quality of and public confidence in its
market. Under this broad discretion, and in addition to its authority
under Subsection 3(a), the proposal notes that the NASD may deny
initial inclusion or apply additional or more stringent criteria for
the initial or continued inclusion of particular securities or suspend
or terminate the inclusion of particular securities based on any event,
condition, or circumstance which exists or occurs that makes initial or
continued inclusion of the securities in Nasdaq inadvisable or
unwarranted in the opinion of the NASD, even though the securities meet
all enumerated criteria for initial or continued inclusion in Nasdaq.
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\4\In addition, this rule change corrects a technical deficiency
in the NASD's rules. The proposal amends Part II, Section 3(a) of
Schedule D to the NASD's By-Laws which currently provides the NASD,
under certain circumstances, with the authority to apply additional
or more stringent criteria for the initial or continued inclusion of
particular securities or to suspend or terminate the inclusion of a
security otherwise qualified for inclusion in Nasdaq. For many
years, the NASD has interpreted Section 3(a) to authorize the NASD
to deny inclusion of a security in Nasdaq. The NASD believes
authority to deny inclusion is inherent in Section 3(a), otherwise
the NASD would be required to include a security in Nasdaq in order
to terminate the security's inclusion. The NASD has determined that
its authority to deny inclusion of particular securities in Nasdaq
in compliance with the enumerated provisions of Section 3(a) should
be stated expressly. The proposed rule change, therefore, amends
Part II, Section 3(a) of Schedule D to clarify this authority.
\5\NASD Manual, Schedules to the By-Laws, Schedule D, Part II,
Secs. 1 & 2, (CCH) 1803 & 1804. Nasdaq includes both Nasdaq
SmallCap Market and Nasdaq National Market securities. Sections 1
and 2 to Part II of Schedule D include the qualification
requirements for domestic and Canadian securities and for non-
Canadian foreign securities and American Depositary Receipts,
respectively. The qualification requirements in Sections 1 and 2 of
Part II to Schedule D apply to both the Nasdaq SmallCap Market and
Nasdaq National Market securities.
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The NASD is concerned about an increase in recent years in the
number of applications for inclusion in Nasdaq by issuers that are
managed, controlled or influenced by persons with a history of
significant securities or commodities violations.\6\ In particular, the
NASD is concerned about issuers substantially influenced by persons who
have previously been the subject of a significant sanction for
violations of state or federal securities laws, self-regulatory
organization (``SRO'') rules and regulations, or the subject of a
felony conviction in connection with the purchase or sale of securities
or commodities. The NASD believes that applications from these issuers
for inclusion in Nasdaq reflect a pattern of activity in which persons
with a history of securities or commodities violations seek to continue
their violative conduct in the securities markets through the
management, control or influence of a publicly-held company. The NASD
has indicated that a case-by-case review of issuer applications has
previously resulted in denials of certain applications pursuant to the
``catch-all'' provision of Part II, Section 3(a)(3) of Schedule D.\7\
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\6\As a result of its concerns, on June 2, 1993, the NASD filed
a proposal to amend Part II, Section 3(a). Securities Exchange Act
Release No. 32605 (July 9, 1993), 58 FR 38150 (July 15, 1993)
(Commission notice of File No. SR-NASD-93-32). Concurrent with the
filing of the instant proposal, the NASD withdrew File No. SR-NASD-
93-32. Letter from T. Grant Callery, Vice President and General
Counsel, NASD, to Mark P. Barracca, Branch Chief, SEC (Apr. 6,
1994).
\7\Section 3(a)(3) provides that ``[t]he Association may, in
accordance with Article IX of the NASD's Code of Procedure, apply
additional or more stringent criteria for the initial or continued
inclusion of particular securities or suspend or terminate the
inclusion of an otherwise qualified security if * * * the
Association deems it necessary to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, or to protect investors and the public
interest.'' NASD Manual, Schedules to the By-Laws, Schedule D, Part
II, Sec. 3(a)(3), (CCH) 1805 (``Section (3)(a)(3)'').
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In exercising discretion about whether to include an issuer in
Nasdaq, the NASD will form a reasonable belief as to whether certain
persons connected with an issuer may be predisposed to engage in
further violative conduct contrary to interests of the investing
public. In these cases, the NASD believes that the history of prior
violative conduct raises concerns regarding the continuing potential
for conduct in connection with the operation of the company or the
market for its securities that would be considered fraudulent and
manipulative, contrary to just and equitable principles of trade, or
otherwise raise investor protection concerns.
The NASD's concern regarding situations where a person with a
history of securities or commodities law violations manages, controls
or influences a Nasdaq issuer is heightened by the fact that inclusion
of the securities of such issuers in Nasdaq would exempt the
transactions in these securities from Commission rules adopted to
prevent certain fraud and abuse in the penny stock market. In August
1989, the Commission adopted Rule 15c2-6 to address sales practice
abuses in low priced over-the-counter (``OTC'') securities.\8\ In
general, this rule prohibits broker-dealers from selling a ``designated
security'' to, or effecting the purchase of a ``designated security''
by, any person, unless the broker-dealer has approved the purchaser's
account for such transactions and received from the purchaser a written
agreement to the transaction.\9\ On April 10, 1992, the Commission
adopted the Penny Stock Disclosure Rules\10\ which, in general, require
that broker-dealers: (1) Furnish to a customer a risk disclosure
document; (2) disclose the current bid and ask quotations and the
commissions; and (3) provide monthly updates on the value of the
securities. Among other exemptions, the Commission excluded from the
scope of Rule 15c2-6 and the Penny Stock Disclosure Rules all issuers
authorized or approved for inclusion in Nasdaq. The NASD believes that
continued vigilance is required to ensure that inclusion in Nasdaq is
not used as a vehicle to avoid compliance with the Penny Stock
Disclosure Rules. The NASD further believes that prospective investors
in the securities of a Nasdaq company are entitled to assume that
securities included in Nasdaq meet the system's standards.\11\
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\8\Securities Exchange Act Release No. 27160 (Aug. 22, 1989), 54
FR 35468 (Aug. 28, 1989).
\9\17 CFR 240.15c2-6(a).
\10\The Penny Stock Sales Practice and Disclosure Rules of the
Act are comprised of Rule 3a51-1 providing definitions of penny
stocks and Rules 15g-1 to 15g-6, 15g-8 and 15g-9. In general, the
Penny Stock Rules have been enacted to require more stringent
regulation of broker-dealers that recommend penny stock transactions
to customers. Under Rule 3a51-1 of the Act, Nasdaq securities are
excluded from the scope of the Penny Stock Disclosure Rules, except
that Nasdaq SmallCap securities under $5.00 are deemed penny stocks
for purposes of Section 15(b)(6) of the Act. See, Securities
Exchange Act Release No. 30608 (Apr. 20, 1992), 57 FR 18004 (Apr.
28, 1992).
\11\See In the Matter of Tassaway, Inc., Securities Exchange Act
Release No. 11291 (Mar. 13, 1975), 45 SEC 706, 6 SEC Docket 427
(``primary emphasis must be placed on the interests of prospective
future investors'').
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III. Comments
As noted above, the Commission received three comment letters in
response to the NASD's proposed rule change. The Task Force on Listing
Standards of Self-Regulatory Organizations of the Federal Regulation of
Securities Committee, Section of Business Law of the American Bar
Association (``ABA Task Force'') expressed general support for the
NASD's initiative, but indicated concern over the retroactive
application of the NASD's rule. In particular, the ABA Task Force is
concerned that the NASD may exclude a current issuer based on a
previously disclosed condition. The ABA Task Force believes that the
NASD should only apply the rule retroactively to issuers where there is
a change in control, disclosure of new material information, or other
meaningful change in circumstance.\12\ A second commenter opposed the
proposal, asserting that the discretion accorded the NASD was unlimited
and could lead the NASD to exclude an issuer from Nasdaq on a basis
wholly unrelated to the legitimate concerns of administering
Nasdaq.\13\ Finally, a third commenter argued that the NASD's
comparison to the NYSE and Amex rules is misplaced. In particular, this
commenter argued that the rules of these exchanges provide greater
procedural protection to issuers in that an appeal within the NYSE or
Amex provides an automatic stay of the initial decision but does not
with an appeal within the NASD of an NASD decision.\14\
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\12\Letter from John F. Olson, Chair, Committee on Federal
Regulation of Securities, ABA Section on Business Law, and Robert
Todd Lang, Chair, Task Force on Listing Standards of Self-Regulatory
Organizations, ABA Section on Business Law, to Jonathan G. Katz,
Secretary, SEC (Apr. 29, 1994). According to the letter, it was
prepared by members of the ABA Task Force, circulated among the
members and a substantial majority of the members agree with it.
Nonetheless, the letter indicated that it does not represent the
official position of the ABA, the Section of Business Law, the
Federal Regulation of Securities Committee or the ABA Task Force.
\13\Letter from Andrew I. Telsey to Jonathan G. Katz, Secretary,
SEC (Apr. 26, 1994). This commenter also asserted that the proposal
was tantamount to a prior restraint on speech and a violation of the
United States Constitution's guarantee of free speech. The
Commission is convinced that the proposal, as designed, will have no
such consequences. The NASD's proposal is similar in many respects
to that of existing authority vested in other securities markets.
\14\Letter from Joseph McLaughlin, Brown & Wood, to Jonathan G.
Katz, Secretary, SEC (May 6, 1994).
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The NASD responded to these comments in letters dated May 17 and
May 25, 1994.\15\ With respect to the concerns of the ABA Task Force,
the NASD believes that limiting this authority to prospective issuers
or to issuers undergoing a material change in circumstance would
inappropriately restrict its oversight of Nasdaq and hinder its review
of individual issuers. In addition, the NASD believes that prospective
investors are entitled to assume that the NASD protects the quality and
integrity of Nasdaq.\16\
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\15\Letters from T. Grant Callery, Vice President and General
Counsel, NASD, to Mark P. Barracca, Branch Chief, SEC (May 17, 1994)
and Suzanne E. Rothwell, Associate General Counsel, NASD, to Mark P.
Barracca, Branch Chief, SEC (May 25, 1994).
\16\In connection with its prior proposal, SR-NASD-93-32, the
NASD responded to a similar comment by the ABA Task Force by stating
that limiting its discretion in the suggested manner would impose an
arbitrary restriction on the NASD's oversight of Nasdaq. This, the
NASD argued, could undermine public confidence in Nasdaq and would
be contrary to interests of retail and institutional investors,
issuers, broker-dealers and the public. See Securities Exchange Act
Release No. 33899 (Apr. 12, 1994), 59 FR 18171 (Apr. 15, 1994)
(Commission notice of File No. SR-NASD-94-19); File No. SR-NASD-93-
32, Amendment No. 2 (File No. SR-NASD-93-32 was withdrawn by the
NASD concurrent with the filing of File No. SR-NASD-94-19).
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The NASD also believes that assertions that the proposed rule would
provide the NASD boundless discretion are unwarranted. First, the
nature and scope of the NASD's discretionary authority is set forth in
the proposed new language. In addition, any determination to exclude an
issuer will be made on a case-by-case basis in accordance with the
procedures set forth in Article IX of the NASD's Code of Procedure,\17\
and an aggrieved party may request the NASD to review its initial
determination.\18\ In addition, the NASD indicated that an issuer may
request, or the NASD may voluntarily grant, a stay pending appeal
within the NASD. Indeed, in the past, the NASD has delayed immediate
delisting when the matter presented novel policy issues. Finally, if
the aggrieved party is dissatisfied with a final determination of the
NASD, it may then request that the Commission stay the NASD's action,
and ultimately it may obtain review of the Commission's final order in
the United States Court of Appeals.
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\17\NASD Manual, Code of Procedure, Art. IX, Sec. 1, (CCH)
3101. The NASD also noted that its Code of Procedure has been
subject to public notice and comment, Securities Exchange Act
Release No. 19097 (Oct. 4, 1982), 47 FR 44903 (Oct. 12, 1982)
(Commission notice of SR-NASD-82-11), and has been approved by the
Commission, Securities Exchange Act Release No. 21838 (Mar. 12,
1985), 50 FR 11035 (Mar. 19, 1985) (Commission approval of SR-NASD-
82-11). The NASD also noted that its authority to exclude an issuer
or to impose additional or more stringent criteria under the
proposed rule is substantially similar to the authority it currently
exercises under Section 3(a)(3).
\18\NASD Manual, Code of Procedure, Art. IX, Secs. 6 & 8, (CCH)
3106 & 3108.
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IV. Discussion
Under Section 19(b) of the Act, the Commission must approve a
proposed NASD rule change if it finds that the proposal is consistent
with the requirements of the Act and the rules and regulations
thereunder that govern the NASD.\19\ No other finding is required.\20\
In evaluating a given proposal, the Commission must examine the record
before it and all relevant factors and necessary information.\21\
Section 15A of the Act addresses with some specificity the requirements
applicable to NASD rules, and those are the standards against which the
Commission must measure the NASD proposal.\22\
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\19\15 U.S.C. 78s(b).
\20\The Commission's statutory role is limited to evaluating the
rule as proposed against the statutory standards, and does not
require the SRO to prove its proposal is the least burdensome
solution to a problem.
\21\In the Securities Acts Amendments of 1975 (``1975
Amendments''), Congress directed the Commission to use its authority
under the Act, including its authority to approve SRO rule changes,
to foster the establishment of a national market system and promote
the goals of economically efficient securities transactions, fair
competition, and best execution. Congress granted the Commission
``broad, discretionary powers'' and ``maximum flexibility'' to
develop a national market system and to carry out these objectives.
Furthermore, Congress gave the Commission ``the power to classify
markets, firms, and securities in any manner it deems necessary or
appropriate in the public interest or for the protection of
investors and to facilitate the development of subsystems within the
national market system.'' S.Rep. No. 75, 94th Cong., 1st. Sess., at
7 (1975).
\22\See 15 U.S.C. 78o-3.
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The Commission has determined to approve the NASD's proposal. The
Commission believes that the rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to the NASD, including the requirements of Sections 15A
(b)(6) and 15A (b)(9) of the Act.\23\ Section 15A(b)(6) requires, in
part, that the rules of a national securities association be designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, and, in general, to protect
investors and the public interest. Section 15A(b)(9) requires that the
NASD's rule not impose any burden on competition not necessary or
appropriate in furtherance of the Act. In addition, the Commission
believes that the rule change will further the goals of Section 11A in
that it will help preserve and strengthen the nation's securities
markets.\24\
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\23\Id. Sec. 78o-3(b) (6) and (9).
\24\Id. Sec. 78k-1(a)(1)(A).
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The Commission believes that inclusion of a security for trading in
Nasdaq, like listing on an exchange, should not depend solely on
meeting quantitative criteria, but should also entail an element of
judgment given the expectations of investors and the imprimatur of
listing on a particular market.\25\ Securities listed for trading or
included in Nasdaq often qualify for margin loans and are exempt from
many of the state blue sky laws, which apply concepts of merit
regulation to determine whether investors in that state may purchase
the issuer's securities.
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\25\See e.g., In the Matter of Silver Shield Mining and Milling
Company, Securities Exchange Act Release No. 6214 (Mar. 18, 1960)
(``use of the facilities of a national securities exchange is a
privilege involving important responsibilities under the Exchange
Act''); In the Matter of Consolidated Virginia Mining Co.,
Securities Exchange Act Release No. 6192 (Feb. 26, 1960) (same).
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Almost twenty years ago, the Commission held in In the Matter of
Tassaway\26\ that the NASD is vested with discretionary authority to
deny an issuer's request that its securities be included in Nasdaq. In
that decision, the Commission stated that while exclusion from Nasdaq
may hurt existing shareholders, the primary emphasis must be placed on
the interest of prospective public investors and that this latter group
is entitled to assume that the securities in Nasdaq meet the NASD
standards. Although the Commission is of the view that the NASD's
current rules authorize it to exclude an issuer, the proposal would
clarify that authority. The Commission believes that this rule change
provides greater protection to both existing and prospective investors.
This rule change provides investors greater assurance that the risk
associated with investing in Nasdaq is market risk rather than the risk
that the promoter or other persons exercising substantial influence
over the issuer is acting in an illegal manner.
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\26\Securities Exchange Act Release No. 11291 (Mar. 13, 1975),
45 SEC 706, 6 SEC Docket 427.
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The rule change will address the increase of applications by
issuers for inclusion in Nasdaq where a person with a history of
significant securities or commodities law violations is in a position
to manage, control or influence the issuer to the detriment of
investors. The rule change also responds to the related concern that
inclusion of these securities in Nasdaq would exempt the transactions
in these securities from Commission rules adopted to prevent certain
fraudulent sales practices and abuses in the penny stock market.\27\
The Commission agrees that with respect to the Nasdaq SmallCap Market,
the rule change furthers the purposes of the Penny Stock Rules adopted
under the Act. The rule change will provide the NASD with authority to
ensure that securities which would otherwise be subject to the Penny
Stock Rules merit this exemption when entering Nasdaq and continue to
merit this exemption thereafter.
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\27\See Letter from Richard G. Ketchum, Director, Division of
Market Regulation, SEC, to Joseph R. Hardiman, President, NASD (Jan.
10, 1990).
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As indicated above, one commenter raised due process concerns. In
the context of excluding issuers from Nasdaq, the Commission believes
these concerns are addressed by the statutory and regulatory authority
and obligations of the NASD. The Act requires the NASD to adopt and
enforce rules designed, among other things, to prevent fraudulent and
manipulative acts and practices and to protect investors and the public
interest.\28\ The Act further requires that the NASD's rules provide a
fair procedure when prohibiting or limiting access to Nasdaq,\29\ which
includes notification of the specific grounds for prohibiting or
limiting access, providing an opportunity to be heard, and maintaining
a record.\30\ In accordance with these obligations, the NASD has
established quantitative and qualitative criteria for inclusion in
Nasdaq,\31\ and procedures to review decisions to deny or limit access
to an issuer the NASD determines does not satisfy the criteria for
inclusion.\32\ Those procedures provide an opportunity for a
hearing\33\ and, although not explicit, an opportunity to request a
stay from the NASD. In addition to these obligations, the Act and
Commission rules require the NASD to notify the Commission promptly of
any final or summary action to prohibit or limit access to Nasdaq.\34\
The Act and Commission rules further provide that any final action by
the NASD is subject to review by the Commission.\35\ In addition, the
Commission may stay summary action by the NASD on its own motion or
upon an application by the issuer.\36\ Finally, a person dissatisfied
with a final determination of the Commission may seek review of that
decision by the United States Court of Appeals.\37\
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\28\15 U.S.C. section 78o-3(b)(6).
\29\Id. section 78o-3(b)(8).
\30\Id. section 78o-3(h)(2).
\31\NASD Manual, Schedules to the By-Laws, Schedule D, Parts II
& III, (CCH) 1803-1806A & 1807-1813.
\32\NASD Manual, Code of Procedure, Art, VIII, Secs. 1-10, (CCH)
3081-3090 (NASD procedures re: summary action prohibiting or
limiting access to Nasdaq) and Art. IX, Secs. 1-9, (CCH) 3101-
3109 (NASD procedures re: final action prohibiting or limiting
access to Nasdaq).
\33\See Belfort v. NASD, No 93-7159, 1994 U.S. Dist. LEXIS 3457
(S.D.N.Y. Mar. 21, 1994) (court lacks jurisdiction because the
plaintiff did not exhaust administrative remedies under the Act);
Dimensional Visions v. NASD, 799 F. Supp. 29 (E.D. Pa. 1992) (same).
\34\15 U.S.C. 78s(d)(1). The Commission rule promulgated
pursuant to 15 U.S.C. 78s(d)(1) distinguishes between notice to the
Commission of final action excluding an issuer from Nasdaq (17 CFR
240.19d-1(e)) and notice to the Commission of summary action
excluding an issuer from Nasdaq (17 CFR 240.19d-1(i)). With respect
to notice of final action, the rule requires that it be promptly
filed with the Commission and include the name of the issuer and the
last known place of business, the statutory and/or regulatory basis
for excluding the issuer, a statement describing the issuer's
response to the NASD's decision, a statement of the finding of facts
and conclusions, a statement supporting the resolution of the
principal issues raised, the effective date of the NASD's action and
other information the NASD deems relevant. 17 CFR 240.19d-1(f). With
respect to notice of summary action, the rule requires that it be
filed with the Commission within 24 hours of the effectiveness of
the action and include the name of the issuer and the last known
place of business, a statement describing the specific statutory
basis for summarily excluding the issuer, the effective date of the
NASD's action and other information the NASD deems relevant. 17 CFR
240.19d-1(i).
\35\15 U.S.C. 78s(d)(2) and 17 CFR 240.19d-3.
\36\15 U.S.C. 78o-3(h)(3) and 17 CFR 240.19d-2.
\37\Id. section 78y(a)(1).
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The Commission believes that this rule strikes the appropriate
balance between protecting investors and providing a marketplace for
issuers satisfying the disclosure requirements under the federal
securities laws. This rule change clarifies the NASD's current practice
of using its authority under Section 3(a)(3) of Part II to Schedule D.
The authority granted under Section 3(a)(3) is discretionary in nature
and this rule change will continue to allow the NASD to exercise its
discretion in applying the standards of Section 3(a)(3) on a case-by-
case basis. The rule change will also provide important guidance to the
NASD review process, and will alert issuers seeking inclusion in
Nasdaq, as well as current Nasdaq issuers, that the NASD considers an
issuer's connection to a person with a history of significant
securities or commodities violations in determining whether to grant
initial or continued inclusion of the security, and that the security
may be subject to additional criteria as a condition for initial and
continued inclusion in Nasdaq. The rule change establishes the NASD's
discretionary authority under Part II, Sections 1 and 2 of Schedule D
to deny initial inclusion or apply additional or more stringent
criteria for the initial or continued inclusion of particular
securities or suspend or terminate the inclusion of particular
securities based on any event, condition, or circumstance which exists
or occurs that makes initial or continued inclusion of the securities
in Nasdaq inadvisable or unwarranted, even though the securities meet
all enumerated criteria for initial or continued inclusion in Nasdaq.
Nonetheless, the Commission expects that before the NASD exercises its
discretionary authority under the new rule, it will consider as one of
several factors the extent to which events or circumstances giving rise
to the proposed action were previously disclosed.
V. Conclusion
In conclusion, for the reasons stated above, the Commission finds
that the rule change is designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade
and, in general, to protect investors and the public interest. The
Commission therefore finds that the proposed rule change is consistent
with the requirements of the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change SR-NASD-94-19 be, and hereby is,
approved.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\38\
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\38\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-14031 Filed 6-8-94; 8:45 am]
BILLING CODE 8010-01-M