82_FR_47464 82 FR 47269 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Modify the Listing Requirements Related to Special Purpose Acquisition Companies Listing Standards To Reduce Round Lot Holders on Nasdaq Capital Market for Initial Listing From 300 to 150 and Eliminate Public Holders for Continued Listing From 300 to Zero, Require $5 Million in Net Tangible Assets for Initial and Continued Listing, and Impose a Deadline To Demonstrate Compliance With Initial Listing Requirements on All Nasdaq Markets Within 30 Days Following Each Business Combination

82 FR 47269 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Modify the Listing Requirements Related to Special Purpose Acquisition Companies Listing Standards To Reduce Round Lot Holders on Nasdaq Capital Market for Initial Listing From 300 to 150 and Eliminate Public Holders for Continued Listing From 300 to Zero, Require $5 Million in Net Tangible Assets for Initial and Continued Listing, and Impose a Deadline To Demonstrate Compliance With Initial Listing Requirements on All Nasdaq Markets Within 30 Days Following Each Business Combination

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 195 (October 11, 2017)

Page Range47269-47272
FR Document2017-21814

Federal Register, Volume 82 Issue 195 (Wednesday, October 11, 2017)
[Federal Register Volume 82, Number 195 (Wednesday, October 11, 2017)]
[Notices]
[Pages 47269-47272]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-21814]



[[Page 47269]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81816; File No. SR-NASDAQ-2017-087]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Modify the Listing 
Requirements Related to Special Purpose Acquisition Companies Listing 
Standards To Reduce Round Lot Holders on Nasdaq Capital Market for 
Initial Listing From 300 to 150 and Eliminate Public Holders for 
Continued Listing From 300 to Zero, Require $5 Million in Net Tangible 
Assets for Initial and Continued Listing, and Impose a Deadline To 
Demonstrate Compliance With Initial Listing Requirements on All Nasdaq 
Markets Within 30 Days Following Each Business Combination

October 4, 2017.
    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 September 20, 2017, 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 modify the listing requirements related to 
Acquisition Companies.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, 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
    In 2009 Nasdaq adopted a rule (IM-5101-2) to impose additional 
listing requirements on a company whose business plan is to complete an 
initial public offering and engage in a merger or acquisition with one 
or more unidentified companies within a specific period of time 
(``Acquisition Companies'').\3\ Based on experience listing these 
companies and reviewing the post-acquisition entities, Nasdaq proposes 
to modify the listing requirements applicable to them. Specifically, 
Nasdaq proposes to reduce the number of round-lot holders required for 
initial listing on the Nasdaq Capital Market from 300 to 150 and to 
eliminate the continued listing shareholder requirement on the Nasdaq 
Capital Market during the period that the company is subject to IM-
5101-2.\4\ Nasdaq also proposes to require that an Acquisition Company 
listed on the Nasdaq Capital Market maintain at least $5 million in net 
tangible assets for initial and continued listing. Finally, Nasdaq 
proposes to impose a deadline for the company to demonstrate compliance 
with all initial listing requirements, including the 300, 400, and 450 
round-lot shareholder requirement on the Nasdaq Capital, Global and 
Global Select Markets, respectively, following a business combination.
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    \3\ Securities Exchange Act Release No. 58228 (July 25, 2008), 
73 FR 44794 (July 31, 2008) (adopting the predecessor to IM-5101-2).
    \4\ Under IM-5101-2(b), 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 within 36 months 
of the effectiveness of its IPO registration statement.
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    The additional requirements currently applicable to an Acquisition 
Company require, in part, that 90% of the gross proceeds of the 
company's offering must be deposited into and retained in an escrow 
account through the date of a business combination; that the entity 
complete a significant business combination within 36 months of the 
effectiveness of the IPO registration statement; and that public 
shareholders who object to the combination have the right to convert 
their common stock into a pro rata share of the funds held in 
escrow.\5\ Following each business combination the combined company 
must meet Nasdaq's requirements for initial listing.
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    \5\ The rules also require that that each proposed business 
combination must be approved by a majority of the company's 
independent directors.
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    Nasdaq has observed that Acquisition Companies often have 
difficulty demonstrating compliance with the shareholder requirement 
for initial and continued listing.\6\ Based on conversations with 
marketplace participants, including the sponsors of Acquisition 
Companies and lawyers and bankers that advise these companies, Nasdaq 
believes these difficulties are due to the unique nature of Acquisition 
Companies, which limits the number of retail investors interested in 
the vehicle and encourages owners to hold their shares until a 
transaction is announced, as long as 3 years after their initial public 
offering. These same features, however, limit the benefit to investors 
of having a shareholder requirement. In that regard, Nasdaq notes that 
the purpose of the shareholder requirement, along with the listing 
requirements pertaining to float and market value of public float, is 
to help ensure that a stock has an investor following and liquid market 
necessary for trading.\7\
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    \6\ Rule 5505(a)(3) requires at least 300 round lot holders for 
initial listing on the Capital Market. Rule 5550(a)(3) requires at 
least 300 public holders for continued listing. To date, most 
Nasdaq-listed Acquisition Companies have opted to list on the 
Capital Market.
    \7\ See, e.g., Rocky Mountain Power Company, Securities Exchange 
Act Release No, 40648 (November 9, 1998) (text at footnote 11).
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    Given the unique nature of Acquisition Companies, however, the 
potential for distorted prices occurring as a result of there being few 
shareholders or illiquidity is less of a concern for their investors. 
During the period between its public offering and the consummation of a 
business combination, the value of an Acquisition Company is based 
primarily on the value of the funds it holds in trust, and the 
Acquisition Company's shareholders have the right to redeem their 
shares for a pro rata share of that trust in conjunction with the 
business combination. As a result, Acquisition Companies, generally, 
have historically traded close to the value in the trust, even when 
they have had few shareholders, which suggests that their lack of 
shareholders has not resulted in distorted prices and the associated 
concerns.\8\ Acquisition Companies must

[[Page 47270]]

also undergo a transformative transaction within 36 months of listing, 
at which time they must meet all listing requirements, including the 
shareholder requirement. This provides an additional protection to 
shareholders, assuring that any liquidity issues are only temporary.
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    \8\ Nasdaq analyzed the trading history of Acquisition Companies 
listed since 2010, including those cited for non-compliance with the 
300 shareholder requirement. Nasdaq observed that shares of all 
reviewed Acquisition Companies traded, on average, close to the $10 
redemption value with the median of the average daily range equal to 
$0.07. This measure was the same for the overall group of the 
reviewed stocks, for the subset of stocks that received deficiency 
notifications for non-compliance with the 300 shareholder 
requirement, and for the remaining subset of stocks for the 
companies that were not cited for non-compliance with the 300 
shareholder requirement. Similarly, the average of each stock's 
average last price was between $9.85 and $9.96 for all three groups.
    Nasdaq also reviewed trading activity following the announcement 
by Acquisition Companies of a pending business combination with an 
operating company and observed no increase in volatility in the vast 
majority of cases. In every instance where volatility did increase 
following the announcement of a pending business combination, the 
Acquisition Company had not been cited for non-compliance with the 
300 shareholder requirement.
    Nasdaq believes that this data analysis supports a conclusion 
that trading in shares of an Acquisition Company, generally, does 
not suffer when the company has fewer shareholders than the current 
Nasdaq requirement.
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    Nasdaq believes that an Exchange Traded Fund (``ETF'') is somewhat 
similar to an Acquisition Company in this regard in that an arbitrage 
mechanism keeps the ETF's price close to the value of its underlying 
securities, even when trading in the ETF's shares is relatively 
illiquid. The initial listing requirements for ETFs do not include a 
shareholder requirement and only 50 shareholders are required for 
continued listing after the ETF has been listed for one year.
    For these reasons, Nasdaq proposes to reduce the shareholder 
requirement for the initial listing of an Acquisition Company on the 
Capital Market from 300 to 150 round-lot shareholders.
    Nasdaq has also observed that it can be difficult for a company, 
once listed, to obtain evidence demonstrating the number of its 
shareholders because many accounts are held in street name and 
shareholders may object to being identified to the company. As a 
result, companies must seek information from broker-dealers and from 
third-parties that distribute information such as proxy materials for 
the broker-dealers. This process is time-consuming and particularly 
burdensome for Acquisition Companies because most operating expenses 
are typically borne by the Acquisition Company's sponsors due to the 
requirement that the gross proceeds of the initial public offering 
remain in the trust account until the closing of the business 
combination.\9\ Accordingly, given the short life of an Acquisition 
Company,\10\ the trading characteristics of Acquisition Companies 
observed by Nasdaq,\11\ and the requirement to meet the initial listing 
standards at the time of the business combination, Nasdaq also proposes 
to eliminate the continued listing shareholder requirement for 
Acquisition Companies.\12\
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    \9\ While under Nasdaq's rules an Acquisition Company could pay 
operating and other expenses, subject to a limitation that 90% of 
the gross proceeds of the company's offering must be retained in 
trust account, Nasdaq understands that marketplace demands typically 
dictate that 100% of the gross proceeds from the IPO be kept in the 
trust account and that only interest earned on that account be used 
to pay taxes and limited amount of operating expenses. Marketplace 
participants have also indicated that the current trend is to allow 
interest earned to be used for payments of taxes only, thus placing 
the burden for all operating expenses on the sponsors.
    \10\ See, Footnote 4, supra.
    \11\ See, Footnote 8, supra.
    \12\ Listing Rule 5550(a)(1) requires that Acquisition Companies 
listed on the Nasdaq Capital Market will continue to have at least 
two registered and active Market Makers, one of which may be a 
Market Maker entering a stabilizing bid. As a result, Nasdaq does 
not expect that the proposed change will result in illiquidity or 
other problems trading the shares of Acquisition Companies.
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    Nasdaq notes that Rule 3a51-1 under the Act \13\ defines a ``penny 
stock'' as any equity security that does not satisfy one of the 
exceptions enumerated in subparagraphs (a) through (g) under the Rule. 
If a security is a penny stock, Rules 15g-1 through 15g-9 under the Act 
\14\ impose certain additional disclosure and other requirements on 
brokers and dealers when effecting transactions in such securities. 
Rule 3a51-1(a)(2) under the Act \15\ excepts from the definition of 
penny stock securities registered on a national securities exchanges 
that have initial listing standards that meet certain requirements, 
including, in the case of primary common stock, 300 round lot holders. 
Rule 3a51-1 also includes alternative exceptions from the definition of 
penny stock. Nasdaq proposes to require that Acquisition Companies have 
$5 million in net tangible assets for initial and continued listing on 
the Nasdaq Capital Market, thereby assuring that the securities of such 
companies satisfy the exclusion from being a penny stock contained in 
Rule 3a51-1(g)(1) of the Act.\16\
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    \13\ 17 CFR 240.3a51-1.
    \14\ 17 CFR 240.15g-1 et seq.
    \15\ 17 CFR 240.3a51-1(a)(2).
    \16\ 17 CFR 240.3a51-1(g)(1). Nasdaq believes that all 
Acquisition Companies currently listed satisfy this alternative.
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    If an Acquisition Company no longer meets the applicable net 
tangible assets requirement following initial listing, its common stock 
could become subject to the penny stock rules.\17\ Broker-dealers that 
effect recommended transactions in such securities, among other things, 
under Commission Rule 3a51-1(g), need to review current financial 
statements of the issuer to verify that the security meets the 
applicable net tangible assets or average revenue test, have a 
reasonable basis for believing they remain accurate, and preserve 
copies of those financial statements as part of its records. To 
facilitate compliance by broker-dealers, Nasdaq will monitor the 
Acquisition Companies that fail the net tangible assets test and will 
publishes on the Nasdaq Listing Center Web site a daily list of any 
such company that no longer meets the net tangible assets requirement 
of the penny stock exclusion, and which does not satisfy any other 
penny stock exclusion.\18\ Nasdaq also specifically reminds broker-
dealers of their obligations under the penny stock rules.\19\
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    \17\ The Commission has previously noted the potential for abuse 
with respect to penny stocks. See, e.g., Securities Exchange Act 
Release No. 49037 (January 16, 2004), 69 FR 2531 (January 8, 2004) 
(``Our original penny stock rules reflected Congress' view that many 
of the abuses occurring in the penny stock market were caused by the 
lack of publicly available information about the market in general 
and about the price and trading volume of particular penny 
stocks'').
    \18\ https://listingcenter.nasdaq.com/PennyStockList.aspx.
    \19\ In 2012, Nasdaq modified its listing requirements to add an 
alternative to the $4 minimum bid price per share requirement (the 
``Alternative Price Filing''). In approving the Alternative Price 
Filing, the Commission stated that it believed that although the 
listing of securities that do not have a blanket exclusion from the 
penny stock rules and require ongoing monitoring may increase 
compliance burdens on broker-dealers, the additional steps taken by 
Nasdaq to facilitate compliance should reduce those burdens and 
that, on balance, Nasdaq's proposal is consistent with the 
requirement of Section 6(b)(5) of the Act that the rules of an 
exchange, among other things, 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. See, Exchange Act Release No. 66830 (April 18, 
2012), 77 FR 24549 (April 24, 2012) (approving SR-NASDAQ-2012-002).
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    In addition, if an Acquisition Company no longer meets the 
applicable net tangible assets requirement following initial listing, 
Nasdaq would initiate delisting proceedings under the Rule 5800 Series 
by sending a Staff Delisting Determination.\20\ While the Acquisition

[[Page 47271]]

Company could request review of that determination by an independent 
Hearings Panel, the Company must make disclosure about its receipt of 
the Delisting Determination and the Hearings Panel can only allow a 
company to remain listed for a maximum of 180 calendar days from the 
date of the Staff Delisting Determination.\21\ Thus, an Acquisition 
Company that became subject to the penny stock rules could remain 
listed on the Nasdaq Capital Market only for a limited time and 
investors would have notice of the pending delisting.
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    \20\ Nasdaq also proposes to modify Listing Rule 5810(c)(1) to 
include a failure to meet the requirements of IM-5101-2 in the list 
of circumstances where Nasdaq Staff will send an immediate Staff 
Delisting Determination. This change will conform Rule 5810 with the 
language already contained in Listing Rule IM-5101-2, which states 
that ``if the Company does not meet the requirements for initial 
listing following a business combination or does not comply with one 
of the requirements [of Listing Rule IM-5101-2], Nasdaq will issue a 
Staff Delisting Determination under Rule 5810 to delist the 
Company's securities.''
    \21\ See, Rule 5815(c)(1). A company could also request review 
of a Panel decision by the Nasdaq Listing and Hearing Review 
Council; however, the Panel decision is generally effective 
immediately and is not stayed even if the company does appeal. See, 
Rules 5815(d)(1) and 5820(a).
---------------------------------------------------------------------------

    Last, Nasdaq notes that the existing rules require that following a 
business combination with an Acquisition Company, the resulting company 
must satisfy all initial listing requirements. The rule does not 
provide a timetable for the company to demonstrate that it satisfies 
those requirements, however. In order to assure that any company that 
does not satisfy the initial listing requirements following a business 
combination enters the delisting process promptly, Nasdaq proposes to 
codify that a company must demonstrate that it meets the initial 
listing requirements within 30 days following a business combination. 
If the company has not demonstrated that it meets the requirements for 
initial listing in that time, Nasdaq staff would issue a Delisting 
Determination, which the company could appeal to an independent 
Hearings Panel as described in the Nasdaq Rule 5800 Series.
    Nasdaq also proposes to delete a duplicative paragraph from the 
rule text and separate certain provisions into new paragraphs to 
enhance the readability of the rule.
    These proposed changes will be effective upon approval of this rule 
by the Commission. However, Nasdaq will permit Acquisition Companies, 
if any, that were listed on the Capital Market before this proposal was 
approved and that have less than $5 million net tangible assets to 
remain listed, provided that such a company must continue to comply 
with the 300 public holder requirement for continued listing.\22\
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    \22\ See, Footnote 16, supra.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\23\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\24\ which requires that the rules of an exchange 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system and, in general, protect investors and the public 
interest. While the change would allow Acquisition Companies to list 
with fewer shareholders, this proposed change is consistent with the 
investor protection provisions of the Act because other protections 
help assure that market prices will not be distorted by any potential 
resulting lack of liquidity, which is the underlying purpose of the 
shareholder requirement. In particular, the ability of a shareholder to 
redeem shares for a pro rata share of the trust helps assure that the 
Acquisition Company will trade close to the value of the assets held in 
trust.\25\
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(5).
    \25\ See, Footnote 8, supra.
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    The proposed rule change will also continue to assure that any 
listed Acquisition Company satisfies an exclusion from the definition 
of a ``penny stock'' under the Act by imposing a new requirement that 
an Acquisition Company must maintain $5 million of net tangible assets. 
Further, following listing Nasdaq will monitor the company and publish 
on its Web site if the company no longer satisfies those additional 
requirements or any of the other exclusions from being a penny stock 
contained in Rule 3a51-1 under the Securities Act of 1933.
    Thus, this change will remove impediments to and perfect the 
mechanism of a free and open market by removing listing requirements 
that prohibit certain companies from listing or remaining listed 
without any concomitant investor protection benefits. In addition, the 
change would also limit the amount of time that an Acquisition Company 
could remain listed following a business combination if it has not 
demonstrated compliance with the initial listing requirements, thereby 
enhancing investor protection. Accordingly, Nasdaq believes that the 
proposal satisfies the Exchange Act requirements.
    Finally, Nasdaq does not believe that this change affecting only 
Acquisition Companies should affect the designation in Rule 146(b) 
under the Securities Act \26\ of securities listed on the Nasdaq 
Capital Market as ``Covered Securities,'' exempt from state 
registration requirements.
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    \26\ 17 CFR 230.146(b).
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    In 1996, Congress amended Section 18 of the Securities Act to 
exempt from state registration requirements securities listed, or 
authorized for listing, on the New York Stock Exchange LLC (``NYSE''), 
the American Stock Exchange LLC (now known as NYSE American LLC), or 
the National Market System of The Nasdaq Stock Market LLC (``the Nasdaq 
Global Market'') (collectively, the ``Named Markets''), or any national 
securities exchange designated by the Commission as having 
``substantially similar'' listing standards to those of the Named 
Markets.\27\ The securities listed on these markets are defined in 
Section 18 as ``Covered Securities.''
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    \27\ See, National Securities Markets Improvement Act of 1996, 
Public Law 104-290, 110 Stat. 3416 (October 11, 1996), adopting 
Section 18 of the Securities Act, 15 U.S.C. 77r(a).
---------------------------------------------------------------------------

    In 2007, the Commission amended Rule 146(b) to designate securities 
listed on the Nasdaq Capital Market as Covered Securities.\28\ After 
careful comparison, the Commission concluded that the listing standards 
of the Nasdaq Capital Market were substantially similar to the listing 
standards of NYSE American.\29\
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    \28\ See, Securities Act Release No. 8791 (April 18, 2007), 72 
FR 20410 (April 24, 2007).
    \29\ At the time, NYSE American was known as NYSE MKT. When 
determining that Nasdaq Capital Market securities are Covered 
Securities, the Commission did not specifically discuss Nasdaq's 300 
round lot requirement for initial listing nor the difference between 
this requirement NYSE MKT's 400 public holder requirement. However, 
in determining to treat securities listed on the BATS Exchange, Inc. 
(``BATS'') as Covered Securities, the Commission reviewed the BATS 
listing standards, which are identical to Nasdaq's, and stated that 
this difference does not preclude ``a determination of substantial 
similarity between the standards.'' Securities Act Release No. 9295 
(January 20, 2012), 77 FR 3590 (January 25, 2012).
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    When the Commission expanded Rule 146(b) to include the Nasdaq 
Capital Market, it compared the listing requirements of the Named 
Markets to those of the Capital Market for common stock, secondary 
classes of common stock and preferred stocks, convertible debt, 
warrants, index warrants and units.\30\ At the time, no other 
securities were listed on the Capital Market, including Exchange Traded 
Products or Acquisition Companies. When the Commission later expanded 
Rule 146(b) to also include securities listed on BATS, it also 
separately considered BATS' listing requirements for other securities 
including Exchange Traded Funds, Portfolio Depository Receipts

[[Page 47272]]

and Index Fund Shares.\31\ Thus, the Commission has recognized that it 
is appropriate to create different listing standards for different 
categories of companies and that such differences do not preclude the 
Commission from finding those securities are Covered Securities.
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    \30\ See, Securities Act Release No. 8791 (April 18, 2007), 72 
FR 20410 (April 24, 2007).
    \31\ See, Securities Act Release No. 9251 (August 8, 2011), 76 
FR 49698 (August 11, 2011).
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    Nasdaq notes that it is not proposing to reduce the shareholder 
requirement for operating companies listed on the Nasdaq Capital 
Market. The proposed change affects only the separate listing 
requirements for Acquisition Companies, which were adopted because 
Nasdaq viewed Acquisition Companies as presenting different risks than 
operating companies and created listing requirements designed to 
address those risks. Similarly, and as described above, just as Nasdaq 
believes Acquisition Companies have unique risks, other facets of their 
structure and the requirements of Nasdaq's rules for Acquisition 
Companies minimize the need for a shareholder requirement. As described 
above, the Commission has previously concluded that categories of 
securities differing from common stock of operating companies can be 
Covered Securities, even though such securities are subject to lower 
listing requirements. Nasdaq believes that, here, the earlier decision 
to regulate Acquisition Companies listed on the Capital Market under 
the quantitative requirements of the Rule 5500 Series should not 
preclude the decision now to adopt a lower minimum shareholder 
requirement for Acquisition Companies, which are a unique category of 
securities, nor should it affect the designation of securities listed 
on the Capital Market as Covered Securities so long as the other 
investor protection requirements of the Act are satisfied. As described 
above, Nasdaq believes such investor protection requirements are 
satisfied. Moreover, preventing Nasdaq from making this change for the 
Capital Market would create the perverse, anti-competitive result that 
the Named Markets (including the Nasdaq Global Market) would be allowed 
to make this change, or any change, but that the markets identified in 
Rule 146(b) could never innovate and could only copy the changes made 
by the Named Markets [sic].

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. While the rule may permit more 
Acquisition Companies to list, or remain listed, on Nasdaq, other 
exchanges could adopt similar rules to compete for such listings.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be 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-2017-087 on the subject line.

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-2017-087. 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 Web site (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 Web site 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 such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2017-087 and should 
be submitted on or before November 1, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-21814 Filed 10-10-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                                                 Federal Register / Vol. 82, No. 195 / Wednesday, October 11, 2017 / Notices                                                    47269

                                                    SECURITIES AND EXCHANGE                                    forth in sections A, B, and C below, of                escrow.5 Following each business
                                                    COMMISSION                                                 the most significant aspects of such                   combination the combined company
                                                                                                               statements.                                            must meet Nasdaq’s requirements for
                                                    [Release No. 34–81816; File No. SR–
                                                    NASDAQ–2017–087]
                                                                                                                                                                      initial listing.
                                                                                                               A. Self-Regulatory Organization’s                         Nasdaq has observed that Acquisition
                                                                                                               Statement of the Purpose of, and                       Companies often have difficulty
                                                    Self-Regulatory Organizations; The                         Statutory Basis for, the Proposed Rule
                                                    NASDAQ Stock Market LLC; Notice of                                                                                demonstrating compliance with the
                                                                                                               Change                                                 shareholder requirement for initial and
                                                    Filing of Proposed Rule Change To
                                                    Modify the Listing Requirements                            1. Purpose                                             continued listing.6 Based on
                                                    Related to Special Purpose Acquisition                                                                            conversations with marketplace
                                                    Companies Listing Standards To                                In 2009 Nasdaq adopted a rule (IM–                  participants, including the sponsors of
                                                    Reduce Round Lot Holders on Nasdaq                         5101–2) to impose additional listing                   Acquisition Companies and lawyers and
                                                    Capital Market for Initial Listing From                    requirements on a company whose                        bankers that advise these companies,
                                                    300 to 150 and Eliminate Public                            business plan is to complete an initial                Nasdaq believes these difficulties are
                                                    Holders for Continued Listing From                         public offering and engage in a merger                 due to the unique nature of Acquisition
                                                    300 to Zero, Require $5 Million in Net                     or acquisition with one or more                        Companies, which limits the number of
                                                    Tangible Assets for Initial and                            unidentified companies within a                        retail investors interested in the vehicle
                                                    Continued Listing, and Impose a                            specific period of time (‘‘Acquisition                 and encourages owners to hold their
                                                    Deadline To Demonstrate Compliance                         Companies’’).3 Based on experience                     shares until a transaction is announced,
                                                                                                               listing these companies and reviewing                  as long as 3 years after their initial
                                                    With Initial Listing Requirements on All
                                                                                                               the post-acquisition entities, Nasdaq                  public offering. These same features,
                                                    Nasdaq Markets Within 30 Days
                                                                                                               proposes to modify the listing                         however, limit the benefit to investors of
                                                    Following Each Business Combination
                                                                                                               requirements applicable to them.                       having a shareholder requirement. In
                                                    October 4, 2017.                                           Specifically, Nasdaq proposes to reduce                that regard, Nasdaq notes that the
                                                       Pursuant to Section 19(b)(1) of the                     the number of round-lot holders                        purpose of the shareholder requirement,
                                                    Securities Exchange Act of 1934                            required for initial listing on the Nasdaq             along with the listing requirements
                                                    (‘‘Act’’) 1, and Rule 19b–4 thereunder,2                   Capital Market from 300 to 150 and to                  pertaining to float and market value of
                                                    notice is hereby given that on                             eliminate the continued listing                        public float, is to help ensure that a
                                                    September 20, 2017, The NASDAQ                                                                                    stock has an investor following and
                                                                                                               shareholder requirement on the Nasdaq
                                                    Stock Market LLC (‘‘Nasdaq’’ or                                                                                   liquid market necessary for trading.7
                                                                                                               Capital Market during the period that                     Given the unique nature of
                                                    ‘‘Exchange’’) filed with the Securities                    the company is subject to IM–5101–2.4
                                                    and Exchange Commission (‘‘SEC’’ or                                                                               Acquisition Companies, however, the
                                                                                                               Nasdaq also proposes to require that an                potential for distorted prices occurring
                                                    ‘‘Commission’’) the proposed rule                          Acquisition Company listed on the
                                                    change as described in Items I, II, and                                                                           as a result of there being few
                                                                                                               Nasdaq Capital Market maintain at least                shareholders or illiquidity is less of a
                                                    III, below, which Items have been                          $5 million in net tangible assets for
                                                    prepared by the Exchange. The                                                                                     concern for their investors. During the
                                                                                                               initial and continued listing. Finally,                period between its public offering and
                                                    Commission is publishing this notice to                    Nasdaq proposes to impose a deadline
                                                    solicit comments on the proposed rule                                                                             the consummation of a business
                                                                                                               for the company to demonstrate                         combination, the value of an
                                                    change from interested persons.                            compliance with all initial listing                    Acquisition Company is based primarily
                                                    I. Self-Regulatory Organization’s                          requirements, including the 300, 400,                  on the value of the funds it holds in
                                                    Statement of the Terms of Substance of                     and 450 round-lot shareholder                          trust, and the Acquisition Company’s
                                                    the Proposed Rule Change                                   requirement on the Nasdaq Capital,                     shareholders have the right to redeem
                                                       The Exchange proposes to modify the                     Global and Global Select Markets,                      their shares for a pro rata share of that
                                                    listing requirements related to                            respectively, following a business                     trust in conjunction with the business
                                                    Acquisition Companies.                                     combination.                                           combination. As a result, Acquisition
                                                       The text of the proposed rule change                       The additional requirements currently               Companies, generally, have historically
                                                    is available on the Exchange’s Web site                    applicable to an Acquisition Company                   traded close to the value in the trust,
                                                    at http://nasdaq.cchwallstreet.com, at                     require, in part, that 90% of the gross                even when they have had few
                                                    the principal office of the Exchange, and                  proceeds of the company’s offering must                shareholders, which suggests that their
                                                    at the Commission’s Public Reference                       be deposited into and retained in an                   lack of shareholders has not resulted in
                                                    Room.                                                      escrow account through the date of a                   distorted prices and the associated
                                                                                                               business combination; that the entity                  concerns.8 Acquisition Companies must
                                                    II. Self-Regulatory Organization’s
                                                    Statement of the Purpose of, and                           complete a significant business
                                                                                                                                                                        5 The rules also require that that each proposed

                                                    Statutory Basis for, the Proposed Rule                     combination within 36 months of the
                                                                                                                                                                      business combination must be approved by a
                                                    Change                                                     effectiveness of the IPO registration                  majority of the company’s independent directors.
                                                                                                               statement; and that public shareholders                  6 Rule 5505(a)(3) requires at least 300 round lot
                                                       In its filing with the Commission, the                  who object to the combination have the                 holders for initial listing on the Capital Market.
                                                    Exchange included statements                               right to convert their common stock into               Rule 5550(a)(3) requires at least 300 public holders
                                                    concerning the purpose of and basis for                                                                           for continued listing. To date, most Nasdaq-listed
                                                                                                               a pro rata share of the funds held in                  Acquisition Companies have opted to list on the
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                                                    the proposed rule change and discussed                                                                            Capital Market.
                                                    any comments it received on the                              3 Securities Exchange Act Release No. 58228 (July      7 See, e.g., Rocky Mountain Power Company,
                                                    proposed rule change. The text of these                    25, 2008), 73 FR 44794 (July 31, 2008) (adopting the   Securities Exchange Act Release No, 40648
                                                    statements may be examined at the                          predecessor to IM–5101–2).                             (November 9, 1998) (text at footnote 11).
                                                                                                                 4 Under IM–5101–2(b), an Acquisition Company           8 Nasdaq analyzed the trading history of
                                                    places specified in Item IV below. The
                                                                                                               must complete one or more business combinations        Acquisition Companies listed since 2010, including
                                                    Exchange has prepared summaries, set                       having an aggregate fair market value of at least      those cited for non-compliance with the 300
                                                                                                               80% of the value of the deposit account within 36      shareholder requirement. Nasdaq observed that
                                                      1 15   U.S.C. 78s(b)(1).                                 months of the effectiveness of its IPO registration    shares of all reviewed Acquisition Companies
                                                      2 17   CFR 240.19b–4.                                    statement.                                                                                        Continued




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                                                    47270                     Federal Register / Vol. 82, No. 195 / Wednesday, October 11, 2017 / Notices

                                                    also undergo a transformative                           business combination.9 Accordingly,                     the penny stock rules.17 Broker-dealers
                                                    transaction within 36 months of listing,                given the short life of an Acquisition                  that effect recommended transactions in
                                                    at which time they must meet all listing                Company,10 the trading characteristics                  such securities, among other things,
                                                    requirements, including the shareholder                 of Acquisition Companies observed by                    under Commission Rule 3a51–1(g), need
                                                    requirement. This provides an                           Nasdaq,11 and the requirement to meet                   to review current financial statements of
                                                    additional protection to shareholders,                  the initial listing standards at the time               the issuer to verify that the security
                                                    assuring that any liquidity issues are                  of the business combination, Nasdaq                     meets the applicable net tangible assets
                                                    only temporary.                                         also proposes to eliminate the continued                or average revenue test, have a
                                                       Nasdaq believes that an Exchange                     listing shareholder requirement for                     reasonable basis for believing they
                                                    Traded Fund (‘‘ETF’’) is somewhat                       Acquisition Companies.12                                remain accurate, and preserve copies of
                                                                                                               Nasdaq notes that Rule 3a51–1 under                  those financial statements as part of its
                                                    similar to an Acquisition Company in
                                                                                                            the Act 13 defines a ‘‘penny stock’’ as                 records. To facilitate compliance by
                                                    this regard in that an arbitrage
                                                                                                            any equity security that does not satisfy               broker-dealers, Nasdaq will monitor the
                                                    mechanism keeps the ETF’s price close
                                                                                                            one of the exceptions enumerated in                     Acquisition Companies that fail the net
                                                    to the value of its underlying securities,
                                                                                                            subparagraphs (a) through (g) under the                 tangible assets test and will publishes
                                                    even when trading in the ETF’s shares
                                                                                                            Rule. If a security is a penny stock,                   on the Nasdaq Listing Center Web site
                                                    is relatively illiquid. The initial listing
                                                                                                            Rules 15g–1 through 15g–9 under the                     a daily list of any such company that no
                                                    requirements for ETFs do not include a
                                                                                                            Act 14 impose certain additional                        longer meets the net tangible assets
                                                    shareholder requirement and only 50
                                                                                                            disclosure and other requirements on                    requirement of the penny stock
                                                    shareholders are required for continued                 brokers and dealers when effecting                      exclusion, and which does not satisfy
                                                    listing after the ETF has been listed for               transactions in such securities. Rule                   any other penny stock exclusion.18
                                                    one year.                                               3a51–1(a)(2) under the Act 15 excepts                   Nasdaq also specifically reminds broker-
                                                       For these reasons, Nasdaq proposes to                from the definition of penny stock                      dealers of their obligations under the
                                                    reduce the shareholder requirement for                  securities registered on a national                     penny stock rules.19
                                                    the initial listing of an Acquisition                   securities exchanges that have initial                    In addition, if an Acquisition
                                                    Company on the Capital Market from                      listing standards that meet certain                     Company no longer meets the
                                                    300 to 150 round-lot shareholders.                      requirements, including, in the case of                 applicable net tangible assets
                                                       Nasdaq has also observed that it can                 primary common stock, 300 round lot                     requirement following initial listing,
                                                    be difficult for a company, once listed,                holders. Rule 3a51–1 also includes                      Nasdaq would initiate delisting
                                                    to obtain evidence demonstrating the                    alternative exceptions from the                         proceedings under the Rule 5800 Series
                                                    number of its shareholders because                      definition of penny stock. Nasdaq                       by sending a Staff Delisting
                                                    many accounts are held in street name                   proposes to require that Acquisition                    Determination.20 While the Acquisition
                                                    and shareholders may object to being                    Companies have $5 million in net
                                                    identified to the company. As a result,                 tangible assets for initial and continued                  17 The Commission has previously noted the

                                                                                                            listing on the Nasdaq Capital Market,                   potential for abuse with respect to penny stocks.
                                                    companies must seek information from                                                                            See, e.g., Securities Exchange Act Release No.
                                                    broker-dealers and from third-parties                   thereby assuring that the securities of                 49037 (January 16, 2004), 69 FR 2531 (January 8,
                                                    that distribute information such as                     such companies satisfy the exclusion                    2004) (‘‘Our original penny stock rules reflected
                                                    proxy materials for the broker-dealers.                 from being a penny stock contained in                   Congress’ view that many of the abuses occurring
                                                                                                            Rule 3a51–1(g)(1) of the Act.16                         in the penny stock market were caused by the lack
                                                    This process is time-consuming and                                                                              of publicly available information about the market
                                                    particularly burdensome for Acquisition                    If an Acquisition Company no longer                  in general and about the price and trading volume
                                                    Companies because most operating                        meets the applicable net tangible assets                of particular penny stocks’’).
                                                    expenses are typically borne by the                     requirement following initial listing, its                 18 https://listingcenter.nasdaq.com/PennyStock

                                                                                                            common stock could become subject to                    List.aspx.
                                                    Acquisition Company’s sponsors due to                                                                              19 In 2012, Nasdaq modified its listing
                                                    the requirement that the gross proceeds                    9 While under Nasdaq’s rules an Acquisition          requirements to add an alternative to the $4
                                                    of the initial public offering remain in                Company could pay operating and other expenses,         minimum bid price per share requirement (the
                                                    the trust account until the closing of the              subject to a limitation that 90% of the gross           ‘‘Alternative Price Filing’’). In approving the
                                                                                                            proceeds of the company’s offering must be retained     Alternative Price Filing, the Commission stated that
                                                                                                            in trust account, Nasdaq understands that               it believed that although the listing of securities that
                                                    traded, on average, close to the $10 redemption         marketplace demands typically dictate that 100% of      do not have a blanket exclusion from the penny
                                                    value with the median of the average daily range        the gross proceeds from the IPO be kept in the trust    stock rules and require ongoing monitoring may
                                                    equal to $0.07. This measure was the same for the       account and that only interest earned on that           increase compliance burdens on broker-dealers, the
                                                    overall group of the reviewed stocks, for the subset    account be used to pay taxes and limited amount         additional steps taken by Nasdaq to facilitate
                                                    of stocks that received deficiency notifications for    of operating expenses. Marketplace participants         compliance should reduce those burdens and that,
                                                    non-compliance with the 300 shareholder                 have also indicated that the current trend is to        on balance, Nasdaq’s proposal is consistent with the
                                                    requirement, and for the remaining subset of stocks     allow interest earned to be used for payments of        requirement of Section 6(b)(5) of the Act that the
                                                    for the companies that were not cited for non-          taxes only, thus placing the burden for all operating   rules of an exchange, among other things, be
                                                    compliance with the 300 shareholder requirement.        expenses on the sponsors.                               designed to prevent fraudulent and manipulative
                                                    Similarly, the average of each stock’s average last        10 See, Footnote 4, supra.                           acts and practices, to promote just and equitable
                                                    price was between $9.85 and $9.96 for all three            11 See, Footnote 8, supra.                           principles of trade and, in general, to protect
                                                    groups.                                                                                                         investors and the public interest. See, Exchange Act
                                                                                                               12 Listing Rule 5550(a)(1) requires that
                                                       Nasdaq also reviewed trading activity following                                                              Release No. 66830 (April 18, 2012), 77 FR 24549
                                                    the announcement by Acquisition Companies of a          Acquisition Companies listed on the Nasdaq Capital      (April 24, 2012) (approving SR–NASDAQ–2012–
                                                    pending business combination with an operating          Market will continue to have at least two registered    002).
                                                                                                            and active Market Makers, one of which may be a
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                                                    company and observed no increase in volatility in                                                                  20 Nasdaq also proposes to modify Listing Rule
                                                    the vast majority of cases. In every instance where     Market Maker entering a stabilizing bid. As a result,
                                                                                                                                                                    5810(c)(1) to include a failure to meet the
                                                    volatility did increase following the announcement      Nasdaq does not expect that the proposed change
                                                                                                                                                                    requirements of IM–5101–2 in the list of
                                                    of a pending business combination, the Acquisition      will result in illiquidity or other problems trading
                                                                                                                                                                    circumstances where Nasdaq Staff will send an
                                                    Company had not been cited for non-compliance           the shares of Acquisition Companies.
                                                                                                               13 17 CFR 240.3a51–1.
                                                                                                                                                                    immediate Staff Delisting Determination. This
                                                    with the 300 shareholder requirement.                                                                           change will conform Rule 5810 with the language
                                                                                                               14 17 CFR 240.15g–1 et seq.
                                                       Nasdaq believes that this data analysis supports                                                             already contained in Listing Rule IM–5101–2,
                                                                                                               15 17 CFR 240.3a51–1(a)(2).
                                                    a conclusion that trading in shares of an                                                                       which states that ‘‘if the Company does not meet
                                                    Acquisition Company, generally, does not suffer            16 17 CFR 240.3a51–1(g)(1). Nasdaq believes that     the requirements for initial listing following a
                                                    when the company has fewer shareholders than the        all Acquisition Companies currently listed satisfy      business combination or does not comply with one
                                                    current Nasdaq requirement.                             this alternative.                                       of the requirements [of Listing Rule IM–5101–2],



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                                                                              Federal Register / Vol. 82, No. 195 / Wednesday, October 11, 2017 / Notices                                                      47271

                                                    Company could request review of that                    2. Statutory Basis                                      Capital Market as ‘‘Covered Securities,’’
                                                    determination by an independent                            The Exchange believes that its                       exempt from state registration
                                                    Hearings Panel, the Company must                        proposal is consistent with Section 6(b)                requirements.
                                                    make disclosure about its receipt of the                of the Act,23 in general, and furthers the                 In 1996, Congress amended Section
                                                    Delisting Determination and the                         objectives of Section 6(b)(5) of the Act,24             18 of the Securities Act to exempt from
                                                    Hearings Panel can only allow a                         which requires that the rules of an                     state registration requirements securities
                                                    company to remain listed for a                          exchange promote just and equitable                     listed, or authorized for listing, on the
                                                    maximum of 180 calendar days from the                   principles of trade, remove                             New York Stock Exchange LLC
                                                    date of the Staff Delisting                             impediments to and perfect the                          (‘‘NYSE’’), the American Stock
                                                    Determination.21 Thus, an Acquisition                   mechanism of a free and open market                     Exchange LLC (now known as NYSE
                                                    Company that became subject to the                      and a national market system and, in                    American LLC), or the National Market
                                                    penny stock rules could remain listed                   general, protect investors and the public               System of The Nasdaq Stock Market
                                                    on the Nasdaq Capital Market only for                   interest. While the change would allow                  LLC (‘‘the Nasdaq Global Market’’)
                                                    a limited time and investors would have                 Acquisition Companies to list with                      (collectively, the ‘‘Named Markets’’), or
                                                    notice of the pending delisting.                        fewer shareholders, this proposed                       any national securities exchange
                                                                                                            change is consistent with the investor                  designated by the Commission as having
                                                       Last, Nasdaq notes that the existing
                                                                                                            protection provisions of the Act because                ‘‘substantially similar’’ listing standards
                                                    rules require that following a business                                                                         to those of the Named Markets.27 The
                                                                                                            other protections help assure that
                                                    combination with an Acquisition                                                                                 securities listed on these markets are
                                                                                                            market prices will not be distorted by
                                                    Company, the resulting company must                                                                             defined in Section 18 as ‘‘Covered
                                                                                                            any potential resulting lack of liquidity,
                                                    satisfy all initial listing requirements.                                                                       Securities.’’
                                                                                                            which is the underlying purpose of the
                                                    The rule does not provide a timetable                   shareholder requirement. In particular,                    In 2007, the Commission amended
                                                    for the company to demonstrate that it                  the ability of a shareholder to redeem                  Rule 146(b) to designate securities listed
                                                    satisfies those requirements, however.                  shares for a pro rata share of the trust                on the Nasdaq Capital Market as
                                                    In order to assure that any company that                helps assure that the Acquisition                       Covered Securities.28 After careful
                                                    does not satisfy the initial listing                    Company will trade close to the value                   comparison, the Commission concluded
                                                    requirements following a business                       of the assets held in trust.25                          that the listing standards of the Nasdaq
                                                    combination enters the delisting process                   The proposed rule change will also                   Capital Market were substantially
                                                    promptly, Nasdaq proposes to codify                     continue to assure that any listed                      similar to the listing standards of NYSE
                                                    that a company must demonstrate that                    Acquisition Company satisfies an                        American.29
                                                    it meets the initial listing requirements               exclusion from the definition of a                         When the Commission expanded Rule
                                                    within 30 days following a business                     ‘‘penny stock’’ under the Act by                        146(b) to include the Nasdaq Capital
                                                    combination. If the company has not                     imposing a new requirement that an                      Market, it compared the listing
                                                    demonstrated that it meets the                          Acquisition Company must maintain $5                    requirements of the Named Markets to
                                                    requirements for initial listing in that                million of net tangible assets. Further,                those of the Capital Market for common
                                                    time, Nasdaq staff would issue a                        following listing Nasdaq will monitor                   stock, secondary classes of common
                                                    Delisting Determination, which the                      the company and publish on its Web                      stock and preferred stocks, convertible
                                                    company could appeal to an                              site if the company no longer satisfies                 debt, warrants, index warrants and
                                                    independent Hearings Panel as                           those additional requirements or any of                 units.30 At the time, no other securities
                                                    described in the Nasdaq Rule 5800                       the other exclusions from being a penny                 were listed on the Capital Market,
                                                    Series.                                                 stock contained in Rule 3a51–1 under                    including Exchange Traded Products or
                                                       Nasdaq also proposes to delete a                     the Securities Act of 1933.                             Acquisition Companies. When the
                                                                                                               Thus, this change will remove                        Commission later expanded Rule 146(b)
                                                    duplicative paragraph from the rule text
                                                                                                            impediments to and perfect the                          to also include securities listed on
                                                    and separate certain provisions into new
                                                                                                            mechanism of a free and open market by                  BATS, it also separately considered
                                                    paragraphs to enhance the readability of
                                                                                                            removing listing requirements that
                                                    the rule.                                                                                                       BATS’ listing requirements for other
                                                                                                            prohibit certain companies from listing
                                                       These proposed changes will be                                                                               securities including Exchange Traded
                                                                                                            or remaining listed without any
                                                    effective upon approval of this rule by                                                                         Funds, Portfolio Depository Receipts
                                                                                                            concomitant investor protection
                                                    the Commission. However, Nasdaq will                    benefits. In addition, the change would                   27 See, National Securities Markets Improvement
                                                    permit Acquisition Companies, if any,                   also limit the amount of time that an                   Act of 1996, Public Law 104–290, 110 Stat. 3416
                                                    that were listed on the Capital Market                  Acquisition Company could remain                        (October 11, 1996), adopting Section 18 of the
                                                    before this proposal was approved and                   listed following a business combination                 Securities Act, 15 U.S.C. 77r(a).
                                                    that have less than $5 million net                      if it has not demonstrated compliance                     28 See, Securities Act Release No. 8791 (April 18,

                                                    tangible assets to remain listed,                       with the initial listing requirements,                  2007), 72 FR 20410 (April 24, 2007).
                                                                                                                                                                      29 At the time, NYSE American was known as
                                                    provided that such a company must                       thereby enhancing investor protection.
                                                                                                                                                                    NYSE MKT. When determining that Nasdaq Capital
                                                    continue to comply with the 300 public                  Accordingly, Nasdaq believes that the                   Market securities are Covered Securities, the
                                                    holder requirement for continued                        proposal satisfies the Exchange Act                     Commission did not specifically discuss Nasdaq’s
                                                    listing.22                                              requirements.                                           300 round lot requirement for initial listing nor the
                                                                                                               Finally, Nasdaq does not believe that                difference between this requirement NYSE MKT’s
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                                                                                                                                                                    400 public holder requirement. However, in
                                                    Nasdaq will issue a Staff Delisting Determination       this change affecting only Acquisition                  determining to treat securities listed on the BATS
                                                    under Rule 5810 to delist the Company’s                 Companies should affect the designation                 Exchange, Inc. (‘‘BATS’’) as Covered Securities, the
                                                    securities.’’                                           in Rule 146(b) under the Securities                     Commission reviewed the BATS listing standards,
                                                      21 See, Rule 5815(c)(1). A company could also                                                                 which are identical to Nasdaq’s, and stated that this
                                                                                                            Act 26 of securities listed on the Nasdaq
                                                    request review of a Panel decision by the Nasdaq                                                                difference does not preclude ‘‘a determination of
                                                    Listing and Hearing Review Council; however, the                                                                substantial similarity between the standards.’’
                                                                                                              23 15 U.S.C. 78f(b).
                                                    Panel decision is generally effective immediately                                                               Securities Act Release No. 9295 (January 20, 2012),
                                                                                                              24 15 U.S.C. 78f(b)(5).
                                                    and is not stayed even if the company does appeal.                                                              77 FR 3590 (January 25, 2012).
                                                    See, Rules 5815(d)(1) and 5820(a).                        25 See, Footnote 8, supra.                              30 See, Securities Act Release No. 8791 (April 18,
                                                      22 See, Footnote 16, supra.                             26 17 CFR 230.146(b).                                 2007), 72 FR 20410 (April 24, 2007).



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                                                    47272                     Federal Register / Vol. 82, No. 195 / Wednesday, October 11, 2017 / Notices

                                                    and Index Fund Shares.31 Thus, the                      of the purposes of the Act. While the                 proposed rule change between the
                                                    Commission has recognized that it is                    rule may permit more Acquisition                      Commission and any person, other than
                                                    appropriate to create different listing                 Companies to list, or remain listed, on               those that may be withheld from the
                                                    standards for different categories of                   Nasdaq, other exchanges could adopt                   public in accordance with the
                                                    companies and that such differences do                  similar rules to compete for such                     provisions of 5 U.S.C. 552, will be
                                                    not preclude the Commission from                        listings.                                             available for Web site viewing and
                                                    finding those securities are Covered                                                                          printing in the Commission’s Public
                                                    Securities.                                             C. Self-Regulatory Organization’s                     Reference Room, 100 F Street NE.,
                                                       Nasdaq notes that it is not proposing                Statement on Comments on the                          Washington, DC 20549, on official
                                                    to reduce the shareholder requirement                   Proposed Rule Change Received From                    business days between the hours of
                                                    for operating companies listed on the                   Members, Participants, or Others                      10:00 a.m. and 3:00 p.m. Copies of such
                                                    Nasdaq Capital Market. The proposed                       No written comments were either                     filing also will be available for
                                                    change affects only the separate listing                solicited or received.                                inspection and copying at the principal
                                                    requirements for Acquisition                                                                                  office of the Exchange. All comments
                                                                                                            III. Date of Effectiveness of the
                                                    Companies, which were adopted                                                                                 received will be posted without change;
                                                                                                            Proposed Rule Change and Timing for
                                                    because Nasdaq viewed Acquisition                                                                             the Commission does not edit personal
                                                                                                            Commission Action
                                                    Companies as presenting different risks                                                                       identifying information from
                                                    than operating companies and created                       Within 45 days of the date of                      submissions. You should submit only
                                                    listing requirements designed to address                publication of this notice in the Federal             information that you wish to make
                                                    those risks. Similarly, and as described                Register or within such longer period (i)             available publicly. All submissions
                                                    above, just as Nasdaq believes                          as the Commission may designate up to                 should refer to File Number SR–
                                                    Acquisition Companies have unique                       90 days of such date if it finds such                 NASDAQ–2017–087 and should be
                                                    risks, other facets of their structure and              longer period to be appropriate and                   submitted on or before November 1,
                                                    the requirements of Nasdaq’s rules for                  publishes its reasons for so finding or               2017.
                                                    Acquisition Companies minimize the                      (ii) as to which the Exchange consents,                 For the Commission, by the Division of
                                                    need for a shareholder requirement. As                  the Commission shall: (a) By order                    Trading and Markets, pursuant to delegated
                                                    described above, the Commission has                     approve or disapprove such proposed                   authority.32
                                                    previously concluded that categories of                 rule change, or (b) institute proceedings             Eduardo A. Aleman,
                                                    securities differing from common stock                  to determine whether the proposed rule                Assistant Secretary.
                                                    of operating companies can be Covered                   change should be disapproved.                         [FR Doc. 2017–21814 Filed 10–10–17; 8:45 am]
                                                    Securities, even though such securities
                                                                                                            IV. Solicitation of Comments                          BILLING CODE 8011–01–P
                                                    are subject to lower listing
                                                    requirements. Nasdaq believes that,                       Interested persons are invited to
                                                    here, the earlier decision to regulate                  submit written data, views, and
                                                                                                                                                                  SECURITIES AND EXCHANGE
                                                    Acquisition Companies listed on the                     arguments concerning the foregoing,
                                                                                                                                                                  COMMISSION
                                                    Capital Market under the quantitative                   including whether the proposed rule
                                                    requirements of the Rule 5500 Series                    change is consistent with the Act.                    [Investment Company Act Release No.
                                                    should not preclude the decision now to                 Comments may be submitted by any of                   32853; 812–14817]
                                                    adopt a lower minimum shareholder                       the following methods:
                                                                                                                                                                  Whitford Asset Management, LLC, et
                                                    requirement for Acquisition Companies,                  Electronic Comments                                   al.
                                                    which are a unique category of
                                                    securities, nor should it affect the                      • Use the Commission’s Internet                     October 4, 2017.
                                                    designation of securities listed on the                 comment form (http://www.sec.gov/                     AGENCY: Securities and Exchange
                                                    Capital Market as Covered Securities so                 rules/sro.shtml); or                                  Commission (‘‘Commission’’).
                                                    long as the other investor protection                     • Send an email to rule-comments@
                                                                                                                                                                  ACTION: Notice.
                                                    requirements of the Act are satisfied. As               sec.gov. Please include File Number SR–
                                                    described above, Nasdaq believes such                   NASDAQ–2017–087 on the subject line.                     Notice of an application for an order
                                                    investor protection requirements are                    Paper Comments                                        under section 6(c) of the Investment
                                                    satisfied. Moreover, preventing Nasdaq                                                                        Company Act of 1940 (the ‘‘Act’’) for an
                                                                                                               • Send paper comments in triplicate                exemption from sections 2(a)(32),
                                                    from making this change for the Capital                 to Secretary, Securities and Exchange
                                                    Market would create the perverse, anti-                                                                       5(a)(1), 22(d), and 22(e) of the Act and
                                                                                                            Commission, 100 F Street NE.,                         rule 22c–1 under the Act, under
                                                    competitive result that the Named                       Washington, DC 20549–1090.
                                                    Markets (including the Nasdaq Global                                                                          sections 6(c) and 17(b) of the Act for an
                                                                                                            All submissions should refer to File                  exemption from sections 17(a)(1) and
                                                    Market) would be allowed to make this
                                                                                                            Number SR–NASDAQ–2017–087. This                       17(a)(2) of the Act, and under section
                                                    change, or any change, but that the
                                                                                                            file number should be included on the                 12(d)(1)(J) for an exemption from
                                                    markets identified in Rule 146(b) could
                                                                                                            subject line if email is used. To help the            sections 12(d)(1)(A) and 12(d)(1)(B) of
                                                    never innovate and could only copy the
                                                                                                            Commission process and review your                    the Act. The requested order would
                                                    changes made by the Named Markets
                                                                                                            comments more efficiently, please use                 permit (a) index-based series of certain
                                                    [sic].
                                                                                                            only one method. The Commission will                  open-end management investment
                                                    B. Self-Regulatory Organization’s
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                                                                            post all comments on the Commission’s                 companies (‘‘Funds’’) to issue shares
                                                    Statement on Burden on Competition                      Internet Web site (http://www.sec.gov/                redeemable in large aggregations only
                                                      The Exchange does not believe that                    rules/sro.shtml). Copies of the                       (‘‘Creation Units’’); (b) secondary market
                                                    the proposed rule change will impose                    submission, all subsequent                            transactions in Fund shares to occur at
                                                    any burden on competition not                           amendments, all written statements                    negotiated market prices rather than at
                                                    necessary or appropriate in furtherance                 with respect to the proposed rule                     net asset value (‘‘NAV’’); (c) certain
                                                                                                            change that are filed with the                        Funds to pay redemption proceeds,
                                                      31 See, Securities Act Release No. 9251 (August 8,    Commission, and all written
                                                    2011), 76 FR 49698 (August 11, 2011).                   communications relating to the                          32 17   CFR 200.30–3(a)(12).



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Document Created: 2018-10-25 10:00:20
Document Modified: 2018-10-25 10:00:20
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 47269 

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