82 FR 47784 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Reduce the Fees for Certain Investment Management Entities and Eligible Portfolio Companies
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 197 (October 13, 2017)
Federal Register Volume 82, Issue 197 (October 13, 2017)
| Page Range | 47784-47787 | |
| FR Document | 2017-22160 |
[Federal Register Volume 82, Number 197 (Friday, October 13, 2017)] [Notices] [Pages 47784-47787] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-22160] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81838; File No. SR-NASDAQ-2017-100] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Reduce the Fees for Certain Investment Management Entities and Eligible Portfolio Companies October 6, 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 26, 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to reduce the fees for certain Investment Management Entities and Eligible Portfolio Companies. While these amendments are effective upon filing, the Exchange has designated the proposed amendments to be operative on January 1, 2018. The text of the proposed rule change is set forth below. Proposed new language is italicized; deleted text is in brackets. * * * * * 5910. The Nasdaq Global Market (Including the Nasdaq Global Select Market) * * * * * IM-5910-1. All-Inclusive Annual Listing Fee (a)-(c) No change. (d) The All-Inclusive Annual Listing Fee will be calculated on total shares outstanding according to the following schedules: (1)-(3) No change. (4) Limited Partnerships [(effective January 1, 2017)]: Up to 75 million shares $37,500 75+ to 100 million shares $50,000 100+ to 125 million shares $62,500 125+ to 150 million shares $67,500 Over 150 million shares $77,500 (5) Investment Management Entities and Eligible Portfolio Companies (effective January 1, 2018): Nasdaq will apply a 50% fee discount to the annual fee otherwise owed under paragraph (d)(1) of this rule for Eligible Portfolio Companies and Investment Management Entities that have one or more Eligible Portfolio Companies. For purposes of this rule, an ``Investment Management Entity'' is a company listed on Nasdaq or another national securities exchange that manages private investment vehicles not registered under the Investment Company Act. An ``Eligible Portfolio Company'' of an Investment Management Entity is a Nasdaq- listed Company in which an Investment Management Entity has owned at least 20% of the common stock on a continuous basis since prior to that company's initial listing. In order to qualify for this discount in any calendar year, a Company, other than a new listing, must submit satisfactory proof to Nasdaq no later than December 31st of the prior year that it satisfies the requirements specified above. A new listing that satisfies these requirements is eligible for the discount upon listing. [[Page 47785]] Notwithstanding the foregoing, if an Investment Management Entity or Eligible Portfolio Company would otherwise be subject to an All- Inclusive Annual Fee that is lower than the fee provided for in this paragraph (5), then the alternative fee schedule shall apply. (e) No change. * * * * * 5920. The Nasdaq Capital Market * * * * * IM-5920-1. All-Inclusive Annual Listing Fee (a)-(c) No change. (d) The All-Inclusive Annual Listing Fee will be calculated on total shares outstanding according to the following schedules: (1)-(3) No change. (4) Limited Partnerships [(effective January 1, 2017)]: Up to 75 million shares $30,000 Over 75 million shares $37,500 (5) Investment Management Entities and Eligible Portfolio Companies (effective January 1, 2018): Nasdaq will apply a 50% fee discount to the annual fee otherwise owed under paragraph (d)(1) of this rule for Eligible Portfolio Companies and Investment Management Entities that have one or more Eligible Portfolio Companies. For purposes of this rule, an ``Investment Management Entity'' is a company listed on Nasdaq or another national securities exchange that manages private investment vehicles not registered under the Investment Company Act. An ``Eligible Portfolio Company'' of an Investment Management Entity is a Nasdaq- listed Company in which an Investment Management Entity has owned at least 20% of the common stock on a continuous basis since prior to that company's initial listing. In order to qualify for this discount in any calendar year, a Company, other than a new listing, must submit satisfactory proof to Nasdaq no later than December 31st of the prior year that it satisfies the requirements specified above. A new listing that satisfies these requirements is eligible for the discount upon listing. Notwithstanding the foregoing, if an Investment Management Entity or Eligible Portfolio Company would otherwise be subject to an All- Inclusive Annual Fee that is lower than the fee provided for in this paragraph (5), then the alternative fee schedule shall apply. (e) No change. * * * * * II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq proposes to reduce the fees for certain Investment Management Entities and Eligible Portfolio Companies. An Investment Management Entity for purposes of this provision would be defined as a company listed on Nasdaq or another national securities exchange which manages private investment vehicles that are not registered under the Investment Company Act. There are a small number of such companies that engage in the business of managing such private equity funds. Through these private equity funds, Investment Management Entities invest in private companies. An ``Eligible Portfolio Company'' of an Investment Management Entity is a Nasdaq-listed company in which the Investment Management Entity has owned at least 20% of the common stock on a continuous basis since prior to that company's initial listing. Investment Management Entities typically provide significant managerial and advisory assistance to their portfolio companies, in part, based on their familiarity, as a public company listed on a national securities exchange, with the requirements for an exchange listing. An Investment Management Entity will frequently seek to exit its funds' investment in a privately-held portfolio company by conducting an initial public offering (IPO) on behalf of that portfolio company. The Investment Management Entity does not typically sell shares in the IPO but, rather, shares not sold in the IPO are gradually sold off over a period of years in the public market. While these Investment Management Entities have control or influence over the decision making of their portfolio companies in both their pre- and post-public phases, the decision as to where to list is typically made jointly by the portfolio company's senior management team and the Investment Management Entity. Nasdaq benefits from its ongoing relationships with these Investment Management Entities (and members of the management teams that had previously dealt with Nasdaq) when competing for the listing of their portfolio companies. In addition, Nasdaq benefits from the efficiencies in dealing with portfolio companies that are benefiting from the guidance and experience of the Investment Management Entities to which they are related. Nasdaq incurs substantial costs in connection with its marketing to companies choosing a listing venue for their IPO. In those cases where the Exchange has a longstanding relationship with the Investment Management Entity controlling a listing applicant, Nasdaq's costs of marketing to the prospect company can be much lower than usual because of the Investment Management Entity's prior experience with Nasdaq. Typically, when pitching for the listing of a company that is choosing a listing venue for its IPO, Nasdaq incurs significant expense, including the time spent by its CEO and other senior management in preparing for and traveling to meetings with the prospect company, travel costs, the cost of developing pitching strategies and the cost of producing marketing materials. In addition, it has been the Exchange's experience that an Investment Management Entity puts high- quality and experienced management teams in place at its portfolio companies prior to listing and that the Investment Management Entity continues to provide significant support to those companies after listing. Consequently, those companies require lower levels of support from Nasdaq's business and regulation departments to assist them in navigating the initial and continued listing process and Nasdaq devotes significantly smaller staff resources to those companies on average than to the typical newly-listed company that is not controlled prior to listing by an Investment Management Entity. Nasdaq believes that these cost savings attributable to its relationship with an Investment Management Entity allow for a reduction in continued listing fees to the Investment Management Entities that are significant shareholders in other Nasdaq-listed companies, as well as to those portfolio companies that have listed on Nasdaq as a consequence of those relationships. Nasdaq also believes that the proposed fee reduction would provide an incentive to Investment Management [[Page 47786]] Entities to list on Nasdaq (or remain listed) themselves, as well as to list additional portfolio companies on Nasdaq. Accordingly, Nasdaq proposes to offer Eligible Portfolio Companies and Investment Management Entities that have one or more Eligible Portfolio Companies listed on Nasdaq a 50% discount to the annual fee otherwise owed by issuers of equity securities. A new listing that satisfies these requirements will be eligible for the discount upon listing based upon Nasdaq's review of public filings disclosing ownership. In order to qualify for this discount in any subsequent calendar year, an issuer must submit satisfactory proof to Nasdaq no later than December 31st of the prior year that it is eligible for the discount.\3\ Investment Management Entities that do not have Eligible Portfolio Companies listed on Nasdaq, are not eligible to receive the discount and will be billed on the same fee schedule as other equity securities. --------------------------------------------------------------------------- \3\ Nasdaq will also review public filings to determine if a company remains eligible to receive a discount. --------------------------------------------------------------------------- The proposed amendment will affect the All-Inclusive Annual Listing Fee schedule \4\ on the Nasdaq Global Market, the Nasdaq Global Select Market and the Nasdaq Capital Market.\5\ In 2014, when Nasdaq adopted the All-Inclusive Annual Listing Fee schedule, Nasdaq considered various factors that distinguish companies, including market tier, shares outstanding and security type, as well as the perceived use of various Nasdaq regulatory and support services by companies of various characteristics.\6\ Due to the relatively few Investment Management Entities and Eligible Portfolio Companies listed on the Exchange at that time, Nasdaq's analysis did not focus on the special characteristics of such companies. Upon further consideration, Nasdaq now believes that the cost savings attributable to its relationship with Investment Management Entities and generally lower levels of support required for Eligible Portfolio Companies and Investment Management Entities with listed Eligible Portfolio Companies warrant a reduced fee. --------------------------------------------------------------------------- \4\ In 2014, Nasdaq adopted an All-Inclusive Annual Listing Fee schedule. Securities Exchange Act Release No. 73647 (November 19, 2014), 79 FR 70232 (November 25, 2014) (SR-NASDAQ-2014-87). Since then, newly listed companies have been subject to the All-Inclusive fee structure and other listed companies could have elected to be on the All-Inclusive fee structure. All companies will be subject to the All-Inclusive fee structure effective January 1, 2018. \5\ Listing Rule 5910 provides that fee schedules for the Nasdaq Global Select Market are the same fee schedules as for the Nasdaq Global Market. \6\ See Securities Exchange Act Release No. 73647, supra note 4. --------------------------------------------------------------------------- Nasdaq notes that American Depositary Receipts (ADRs), closed-end funds and limited partnerships also have different fee schedules than other listed equity securities. Nasdaq believes that the characteristics of ADRs, closed-end funds and limited partnerships are different than the characteristics of Investment Management Entities and Eligible Portfolio Companies and that it is therefore appropriate to apply a different fee schedule for Investment Management Entities and Eligible Portfolio Companies. If an Eligible Portfolio Company or an Investment Management Entity with listed Eligible Portfolio Companies lists ADRs, or is a closed-end fund or a limited partnership, its All-Inclusive fee will be the lower of: (i) The fee applicable to ADRs, closed-end funds or limited partnerships, as applicable, or (ii) the 50% fee discount to the fee applicable to other equity securities listed on the same tier. Nasdaq notes that no other company will be required to pay higher fees as a result of the proposed amendments and represents that the proposed fee change will have no impact on the resources available for its regulatory programs. The proposed fee change will be operative January 1, 2018.\7\ --------------------------------------------------------------------------- \7\ Nasdaq also proposes to delete an old effective date from IM-5910-1(d)(4) and IM-5920-1(d)(4). --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\8\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\9\ in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility or system which the Exchange operates or controls, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78f(b). \9\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- As a preliminary matter, Nasdaq competes for listings with other national securities exchanges and companies can easily choose to list on, or transfer to, those alternative venues. As a result, the fees Nasdaq can charge listed companies are constrained by the fees charged by its competitors and Nasdaq cannot charge prices in a manner that would be unreasonable, inequitable, or unfairly discriminatory. Nasdaq believes that the proposed fee change reducing the fee paid by Eligible Portfolio Companies and Investment Management Entities with listed Eligible Portfolio Companies is reasonable and not unfairly discriminatory because it recognizes the reduced regulatory and business costs Nasdaq incurs for listing these Investment Management Entities and Eligible Portfolio Companies. Specifically, Nasdaq benefits from significant cost and resource-utilization savings when listing portfolio companies of Investment Management Entities as it does not have to engage in significant marketing efforts because the decision makers at the Investment Management Entity are already familiar with Nasdaq. Typically when pitching for the listing of a company that is choosing a listing venue for its IPO, Nasdaq incurs significant expense, including: The time spent by its CEO and other senior management in preparing for and traveling to meetings with the prospect company, travel costs, the cost of developing pitching strategies and the cost of producing marketing materials. As Nasdaq saves much of this expense when pitching to a portfolio company of an Investment Management Entity with which Nasdaq has an established relationship, Nasdaq believes that it is reasonable to share some of those savings with listed Investment Management Entities and their Eligible Portfolio Companies. In addition, Nasdaq typically has lower costs and resource utilization in connection with the initial and continued listing of Eligible Portfolio Companies than with other new listings, as the Exchange benefits from dealing with the high-quality and experienced management teams Investment Management Entities put in place at portfolio companies prior to listing and the ongoing relationship those companies maintain with staff at the Investment Management Entity, who can share their experience as a public company listed on a national securities exchange. Nasdaq also believes that the proposed discount is reasonable in that it will create a reasonable commercial incentive for Investment Management Entities and the management of their portfolio companies to consider listing on Nasdaq and to remain listed. Nasdaq believes that it is not unfairly discriminatory to discount continued listing fees as a means of recognizing its cost savings related to the listing of an Investment Management Entity and its Eligible Portfolio Companies. This is because a significant portion of the Exchange's savings arise from the efficiencies it experiences on an ongoing basis in dealing with Eligible Portfolio Companies for such time as the Investment Management Entity retains a [[Page 47787]] significant investment and is thereby motivated to provide ongoing advice and assistance. These reduced costs are a non-discriminatory reason to charge an Investment Management Entity and its Eligible Portfolio Companies a lower All-Inclusive Annual Listing Fee. Currently, ADRs, closed-end funds and limited partnerships also pay lower All-Inclusive Annual Listing Fees than other issuers of equity securities. Nasdaq believes it is appropriate to apply a fee schedule to Investment Management Entities and Eligible Portfolio Companies that is different from those applicable to either ADRs, closed-end funds or limited partnerships due to their differing characteristics. Specifically, Nasdaq charges lower listing fees for ADRs because, among other differences, the U.S. listing is not typically the issuer of an ADR's primary listing.\10\ Similarly, Nasdaq charges lower listing fees for closed-end funds because they are particularly sensitive to the expenses they incur, given that they compete for investment dollars based on return.\11\ Finally, Nasdaq charges lower listing fees for limited partnerships because they are not subject to most corporate governance requirements.\12\ As a result, offering a different discount to Investment Management Entities and their Eligible Portfolio Companies on the All-Inclusive Annual Fee schedule than to ADRs, closed-end funds and limited partnerships is not inequitable or unfairly discriminatory. --------------------------------------------------------------------------- \10\ See Securities Exchange Act Release No. 73647, supra note 4. \11\ Id. \12\ See Securities Exchange Act Release No. 79770 (January 10, 2017), 82 FR 4947 (January 17, 2017) (SR-NASDAQ-2016-173). --------------------------------------------------------------------------- While the proposed fee reduction only applies to Investment Management Entities and their Eligible Portfolio Companies on the All- Inclusive Annual Fee schedule, Nasdaq notes that all companies will transition to that fee schedule in 2018 at the same time that this fee change will become effective. Finally, Nasdaq believes that the proposed fees are consistent with the investor protection objectives of Section 6(b)(5) of the Act \13\ in that they are designed to promote just and equitable principles of trade, to remove impediments to a free and open market and national market system, and in general to protect investors and the public interest. Specifically, the amount of revenue forgone by allowing an Investment Management Entity and its Eligible Portfolio Companies to pay lower fees is not substantial, and the reduced fees may result in more Investment Management Entities and their Eligible Portfolio Companies listing on Nasdaq, thereby increasing the resources available for Nasdaq's listing compliance program, which helps to assure that listing standards are properly enforced and investors are protected. Consequently, Nasdaq believes that the potential loss of revenue from the reduction of fees for Investment Management Entities and their Eligible Portfolio Companies, as proposed, will not hinder its ability to fulfill its regulatory responsibilities. --------------------------------------------------------------------------- \13\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. The market for listing services is extremely competitive and listed companies may freely choose alternative venues based on the aggregate fees assessed, and the value provided by each listing. This rule proposal does not burden competition with other listing venues, which are similarly free to set their fees. For these reasons, Nasdaq does not believe that the proposed rule change will result in any burden on competition for 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 The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.\14\ --------------------------------------------------------------------------- \14\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse 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-2017-100 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASDAQ-2017-100. 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-2017-100, and should be submitted on or before November 3, 2017. --------------------------------------------------------------------------- \15\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\15\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-22160 Filed 10-12-17; 8:45 am] BILLING CODE 8011-01-P
![47784 Federal Register / Vol. 82, No. 197 / Friday, October 13, 2017 / Notices
the 30-day operative delay is consistent proposed rule change between the I. Self-Regulatory Organization’s
with the protection of investors and the Commission and any person, other than Statement of the Terms of Substance of
public interest as it will allow the those that may be withheld from the the Proposed Rule Change
Exchange to accurately represent the public in accordance with the The Exchange proposes to reduce the
fees it charges and thereby avoid provisions of 5 U.S.C. 552, will be fees for certain Investment Management
potential confusion of market available for Web site viewing and Entities and Eligible Portfolio
participants. Accordingly, the printing in the Commission’s Public Companies.
Commission hereby waives the 30-day Reference Room, 100 F Street NE., While these amendments are effective
operative delay and designates the Washington, DC 20549 on official upon filing, the Exchange has
proposed rule change operative upon business days between the hours of designated the proposed amendments to
filing.14 10:00 a.m. and 3:00 p.m. Copies of the be operative on January 1, 2018.
At any time within 60 days of the filing also will be available for The text of the proposed rule change
filing of the proposed rule change, the inspection and copying at the principal is set forth below. Proposed new
Commission summarily may office of the Exchange. All comments language is italicized; deleted text is in
temporarily suspend such rule change if received will be posted without change; brackets.
it appears to the Commission that such the Commission does not edit personal * * * * *
action is necessary or appropriate in the
identifying information from 5910. The Nasdaq Global Market
public interest, for the protection of
submissions. You should submit only (Including the Nasdaq Global Select
investors, or otherwise in furtherance of
information that you wish to make Market)
the purposes of the Act. If the
Commission takes such action, the available publicly. All submissions
* * * * *
Commission will institute proceedings should refer to File Number SR–C2–
2017–026 and should be submitted on IM–5910–1. All-Inclusive Annual
to determine whether the proposed rule
or before November 3, 2017. Listing Fee
change should be approved or
disapproved. For the Commission, by the Division of (a)–(c) No change.
Trading and Markets, pursuant to delegated (d) The All-Inclusive Annual Listing
IV. Solicitation of Comments Fee will be calculated on total shares
authority.15
Interested persons are invited to Eduardo A. Aleman,
outstanding according to the following
submit written data, views, and schedules:
Assistant Secretary. (1)–(3) No change.
arguments concerning the foregoing,
including whether the proposed rule [FR Doc. 2017–22158 Filed 10–12–17; 8:45 am] (4) Limited Partnerships [(effective
change is consistent with the Act. BILLING CODE 8011–01–P January 1, 2017)]:
Comments may be submitted by any of Up to 75 million shares $37,500
the following methods: 75+ to 100 million shares $50,000
SECURITIES AND EXCHANGE 100+ to 125 million shares $62,500
Electronic Comments COMMISSION 125+ to 150 million shares $67,500
• Use the Commission’s Internet Over 150 million shares $77,500
comment form (http://www.sec.gov/ [Release No. 34–81838; File No. SR– (5) Investment Management Entities
rules/sro.shtml); or NASDAQ–2017–100] and Eligible Portfolio Companies
• Send an email to rule-comments@ (effective January 1, 2018):
sec.gov. Please include File Number SR– Self-Regulatory Organizations; The Nasdaq will apply a 50% fee discount
C2–2017–026 on the subject line. NASDAQ Stock Market LLC; Notice of to the annual fee otherwise owed under
Filing and Immediate Effectiveness of paragraph (d)(1) of this rule for Eligible
Paper Comments Portfolio Companies and Investment
Proposed Rule Change To Reduce the
• Send paper comments in triplicate Fees for Certain Investment Management Entities that have one or
to Secretary, Securities and Exchange more Eligible Portfolio Companies. For
Management Entities and Eligible
Commission, 100 F Street NE., purposes of this rule, an ‘‘Investment
Portfolio Companies
Washington, DC 20549–1090. Management Entity’’ is a company listed
October 6, 2017. on Nasdaq or another national
All submissions should refer to File securities exchange that manages
Number SR–C2–2017–026. This file Pursuant to Section 19(b)(1) of the private investment vehicles not
number should be included on the Securities Exchange Act of 1934 registered under the Investment
subject line if email is used. To help the (‘‘Act’’),1 and Rule 19b–4 thereunder,2 Company Act. An ‘‘Eligible Portfolio
Commission process and review your notice is hereby given that, on Company’’ of an Investment
comments more efficiently, please use September 26, 2017, The NASDAQ Management Entity is a Nasdaq-listed
only one method. The Commission will Stock Market LLC (‘‘Nasdaq’’ or Company in which an Investment
post all comments on the Commission’s ‘‘Exchange’’) filed with the Securities Management Entity has owned at least
Internet Web site (http://www.sec.gov/ and Exchange Commission (‘‘SEC’’ or 20% of the common stock on a
rules/sro.shtml). Copies of the ‘‘Commission’’) the proposed rule continuous basis since prior to that
submission, all subsequent change as described in Items I, II, and company’s initial listing.
amendments, all written statements
asabaliauskas on DSKBBXCHB2PROD with NOTICES
III below, which Items have been In order to qualify for this discount in
with respect to the proposed rule prepared by the Exchange. The any calendar year, a Company, other
change that are filed with the Commission is publishing this notice to than a new listing, must submit
Commission, and all written solicit comments on the proposed rule satisfactory proof to Nasdaq no later
communications relating to the change from interested persons. than December 31st of the prior year
14 For purposes only of waiving the 30-day
that it satisfies the requirements
operative delay, the Commission has considered the
15 17 CFR 200.30–3(a)(12). specified above. A new listing that
proposed rule’s impact on efficiency, competition, 1 15 U.S.C. 78s(b)(1). satisfies these requirements is eligible
and capital formation. See 15 U.S.C. 78c(f). 2 17 CFR 240.19b–4. for the discount upon listing.
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![Federal Register / Vol. 82, No. 197 / Friday, October 13, 2017 / Notices 47785
Notwithstanding the foregoing, if an II. Self-Regulatory Organization’s made jointly by the portfolio company’s
Investment Management Entity or Statement of the Purpose of, and senior management team and the
Eligible Portfolio Company would Statutory Basis for, the Proposed Rule Investment Management Entity. Nasdaq
otherwise be subject to an All-Inclusive Change benefits from its ongoing relationships
Annual Fee that is lower than the fee In its filing with the Commission, the with these Investment Management
provided for in this paragraph (5), then Exchange included statements Entities (and members of the
the alternative fee schedule shall apply. concerning the purpose of and basis for management teams that had previously
(e) No change. the proposed rule change and discussed dealt with Nasdaq) when competing for
* * * * * any comments it received on the the listing of their portfolio companies.
proposed rule change. The text of these In addition, Nasdaq benefits from the
5920. The Nasdaq Capital Market statements may be examined at the efficiencies in dealing with portfolio
* * * * * places specified in Item IV below. The companies that are benefiting from the
Exchange has prepared summaries, set guidance and experience of the
IM–5920–1. All-Inclusive Annual forth in sections A, B, and C below, of Investment Management Entities to
Listing Fee the most significant aspects of such which they are related.
statements. Nasdaq incurs substantial costs in
(a)–(c) No change.
connection with its marketing to
(d) The All-Inclusive Annual Listing A. Self-Regulatory Organization’s companies choosing a listing venue for
Fee will be calculated on total shares Statement of the Purpose of, and their IPO. In those cases where the
outstanding according to the following Statutory Basis for, the Proposed Rule Exchange has a longstanding
schedules: Change relationship with the Investment
(1)–(3) No change. Management Entity controlling a listing
1. Purpose
(4) Limited Partnerships [(effective applicant, Nasdaq’s costs of marketing
January 1, 2017)]: Nasdaq proposes to reduce the fees for to the prospect company can be much
certain Investment Management Entities lower than usual because of the
Up to 75 million shares $30,000
and Eligible Portfolio Companies. An Investment Management Entity’s prior
Over 75 million shares $37,500 Investment Management Entity for experience with Nasdaq. Typically,
(5) Investment Management Entities purposes of this provision would be when pitching for the listing of a
and Eligible Portfolio Companies defined as a company listed on Nasdaq company that is choosing a listing
(effective January 1, 2018): or another national securities exchange venue for its IPO, Nasdaq incurs
Nasdaq will apply a 50% fee discount which manages private investment significant expense, including the time
to the annual fee otherwise owed under vehicles that are not registered under spent by its CEO and other senior
paragraph (d)(1) of this rule for Eligible the Investment Company Act. There are management in preparing for and
Portfolio Companies and Investment a small number of such companies that traveling to meetings with the prospect
Management Entities that have one or engage in the business of managing such company, travel costs, the cost of
more Eligible Portfolio Companies. For private equity funds. Through these developing pitching strategies and the
purposes of this rule, an ‘‘Investment private equity funds, Investment cost of producing marketing materials.
Management Entity’’ is a company listed Management Entities invest in private In addition, it has been the Exchange’s
on Nasdaq or another national companies. An ‘‘Eligible Portfolio experience that an Investment
securities exchange that manages Company’’ of an Investment Management Entity puts high-quality
private investment vehicles not Management Entity is a Nasdaq-listed and experienced management teams in
registered under the Investment company in which the Investment place at its portfolio companies prior to
Company Act. An ‘‘Eligible Portfolio Management Entity has owned at least listing and that the Investment
Company’’ of an Investment 20% of the common stock on a Management Entity continues to
Management Entity is a Nasdaq-listed continuous basis since prior to that provide significant support to those
Company in which an Investment company’s initial listing. companies after listing. Consequently,
Management Entity has owned at least Investment Management Entities those companies require lower levels of
20% of the common stock on a typically provide significant managerial support from Nasdaq’s business and
continuous basis since prior to that and advisory assistance to their regulation departments to assist them in
company’s initial listing. portfolio companies, in part, based on navigating the initial and continued
their familiarity, as a public company listing process and Nasdaq devotes
In order to qualify for this discount in
listed on a national securities exchange, significantly smaller staff resources to
any calendar year, a Company, other
with the requirements for an exchange those companies on average than to the
than a new listing, must submit
listing. An Investment Management typical newly-listed company that is not
satisfactory proof to Nasdaq no later
Entity will frequently seek to exit its controlled prior to listing by an
than December 31st of the prior year
funds’ investment in a privately-held Investment Management Entity.
that it satisfies the requirements
portfolio company by conducting an Nasdaq believes that these cost
specified above. A new listing that
initial public offering (IPO) on behalf of savings attributable to its relationship
satisfies these requirements is eligible
that portfolio company. The Investment with an Investment Management Entity
for the discount upon listing.
Management Entity does not typically allow for a reduction in continued
Notwithstanding the foregoing, if an
asabaliauskas on DSKBBXCHB2PROD with NOTICES
sell shares in the IPO but, rather, shares listing fees to the Investment
Investment Management Entity or not sold in the IPO are gradually sold off Management Entities that are significant
Eligible Portfolio Company would over a period of years in the public shareholders in other Nasdaq-listed
otherwise be subject to an All-Inclusive market. While these Investment companies, as well as to those portfolio
Annual Fee that is lower than the fee Management Entities have control or companies that have listed on Nasdaq as
provided for in this paragraph (5), then influence over the decision making of a consequence of those relationships.
the alternative fee schedule shall apply. their portfolio companies in both their Nasdaq also believes that the proposed
(e) No change. pre- and post-public phases, the fee reduction would provide an
* * * * * decision as to where to list is typically incentive to Investment Management
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![Federal Register / Vol. 82, No. 197 / Friday, October 13, 2017 / Notices 47787
significant investment and is thereby Investment Management Entities and change is consistent with the Act.
motivated to provide ongoing advice their Eligible Portfolio Companies Comments may be submitted by any of
and assistance. These reduced costs are listing on Nasdaq, thereby increasing the following methods:
a non-discriminatory reason to charge the resources available for Nasdaq’s
an Investment Management Entity and Electronic Comments
listing compliance program, which
its Eligible Portfolio Companies a lower helps to assure that listing standards are • Use the Commission’s Internet
All-Inclusive Annual Listing Fee. properly enforced and investors are comment form (http://www.sec.gov/
Currently, ADRs, closed-end funds protected. Consequently, Nasdaq rules/sro.shtml); or
and limited partnerships also pay lower believes that the potential loss of
All-Inclusive Annual Listing Fees than revenue from the reduction of fees for • Send an email to rule-comments@
other issuers of equity securities. Investment Management Entities and sec.gov. Please include File Number SR–
Nasdaq believes it is appropriate to their Eligible Portfolio Companies, as NASDAQ–2017–100 on the subject line.
apply a fee schedule to Investment proposed, will not hinder its ability to Paper Comments
Management Entities and Eligible fulfill its regulatory responsibilities.
Portfolio Companies that is different • Send paper comments in triplicate
from those applicable to either ADRs, B. Self-Regulatory Organization’s to Brent J. Fields, Secretary, Securities
closed-end funds or limited Statement on Burden on Competition and Exchange Commission, 100 F Street
partnerships due to their differing Nasdaq does not believe that the NE., Washington, DC 20549–1090.
characteristics. Specifically, Nasdaq proposed rule change will result in any
charges lower listing fees for ADRs All submissions should refer to File
burden on competition that is not
because, among other differences, the Number SR–NASDAQ–2017–100. This
necessary or appropriate in furtherance
U.S. listing is not typically the issuer of file number should be included on the
of the purposes of the Act, as amended.
an ADR’s primary listing.10 Similarly, subject line if email is used. To help the
The market for listing services is
Nasdaq charges lower listing fees for Commission process and review your
extremely competitive and listed
closed-end funds because they are comments more efficiently, please use
companies may freely choose alternative
particularly sensitive to the expenses only one method. The Commission will
venues based on the aggregate fees
they incur, given that they compete for post all comments on the Commission’s
assessed, and the value provided by
investment dollars based on return.11 Internet Web site (http://www.sec.gov/
each listing. This rule proposal does not
Finally, Nasdaq charges lower listing rules/sro.shtml). Copies of the
burden competition with other listing
fees for limited partnerships because submission, all subsequent
venues, which are similarly free to set
they are not subject to most corporate amendments, all written statements
their fees. For these reasons, Nasdaq
governance requirements.12 As a result, with respect to the proposed rule
does not believe that the proposed rule
offering a different discount to change that are filed with the
change will result in any burden on
Investment Management Entities and Commission, and all written
competition for listings.
their Eligible Portfolio Companies on communications relating to the
the All-Inclusive Annual Fee schedule C. Self-Regulatory Organization’s proposed rule change between the
than to ADRs, closed-end funds and Statement on Comments on the Commission and any person, other than
limited partnerships is not inequitable Proposed Rule Change Received From those that may be withheld from the
or unfairly discriminatory. Members, Participants, or Others public in accordance with the
While the proposed fee reduction No written comments were either provisions of 5 U.S.C. 552, will be
only applies to Investment Management solicited or received. available for Web site viewing and
Entities and their Eligible Portfolio printing in the Commission’s Public
Companies on the All-Inclusive Annual III. Date of Effectiveness of the Reference Room, 100 F Street NE.,
Fee schedule, Nasdaq notes that all Proposed Rule Change and Timing for Washington, DC 20549 on official
companies will transition to that fee Commission Action business days between the hours of
schedule in 2018 at the same time that The foregoing rule change has become 10:00 a.m. and 3:00 p.m. Copies of such
this fee change will become effective. effective pursuant to Section filing also will be available for
Finally, Nasdaq believes that the 19(b)(3)(A)(ii) of the Act.14 inspection and copying at the principal
proposed fees are consistent with the At any time within 60 days of the office of the Exchange. All comments
investor protection objectives of Section filing of the proposed rule change, the received will be posted without change;
6(b)(5) of the Act 13 in that they are Commission summarily may the Commission does not edit personal
designed to promote just and equitable temporarily suspend such rule change if identifying information from
principles of trade, to remove it appears to the Commission that such submissions. You should submit only
impediments to a free and open market action is: (i) Necessary or appropriate in information that you wish to make
and national market system, and in the public interest; (ii) for the protection available publicly. All submissions
general to protect investors and the of investors; or (iii) otherwise in should refer to File Number SR–
public interest. Specifically, the amount furtherance of the purposes of the Act. NASDAQ–2017–100, and should be
of revenue forgone by allowing an If the Commission takes such action, the submitted on or before November 3,
Investment Management Entity and its Commission shall institute proceedings 2017.
Eligible Portfolio Companies to pay to determine whether the proposed rule For the Commission, by the Division of
asabaliauskas on DSKBBXCHB2PROD with NOTICES
lower fees is not substantial, and the should be approved or disapproved. Trading and Markets, pursuant to delegated
reduced fees may result in more authority.15
IV. Solicitation of Comments
Eduardo A. Aleman,
10 See Securities Exchange Act Release No. 73647, Interested persons are invited to
supra note 4. submit written data, views, and Assistant Secretary.
11 Id.
arguments concerning the foregoing, [FR Doc. 2017–22160 Filed 10–12–17; 8:45 am]
12 See Securities Exchange Act Release No. 79770
(January 10, 2017), 82 FR 4947 (January 17, 2017) including whether the proposed rule BILLING CODE 8011–01–P
(SR–NASDAQ–2016–173).
13 15 U.S.C. 78f(b)(5). 14 15 U.S.C. 78s(b)(3)(A)(ii). 15 17 CFR 200.30–3(a)(12).
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Document Created: 2017-10-13 04:33:40
Document Modified: 2017-10-13 04:33:40
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 82 FR 47784 |
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