83 FR 42541 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Initial and Continued Listing Standards for Subscription Receipts and Fees for Their Listing
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 163 (August 22, 2018)
Federal Register Volume 83, Issue 163 (August 22, 2018)
| Page Range | 42541-42544 | |
| FR Document | 2018-18058 |
[Federal Register Volume 83, Number 163 (Wednesday, August 22, 2018)] [Notices] [Pages 42541-42544] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-18058] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83861; File No. SR-NASDAQ-2018-059] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Initial and Continued Listing Standards for Subscription Receipts and Fees for Their Listing August 16, 2018. 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 August 3, 2018, 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 adopt initial and continued listing standards for subscription receipts and fees for their listing. The text of the proposed rule change is available on the Exchange's website 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 The Exchange proposes to adopt initial and continued listing standards for the listing of Subscription Receipts on the Nasdaq Capital Market and fees for their listing. Subscription Receipts are a financing technique that has been used for many years by Canadian public companies. Typically, Canadian companies use Subscription Receipts as a means of providing cash consideration in merger or acquisition transactions. Subscription Receipts are sold in a public offering that occurs after the execution of an acquisition agreement. The proceeds of the Subscription Receipt offering are held in a custody account and, if the related acquisition closes, the Subscription Receipt holders receive a specified number of shares of the issuer. If the acquisition does not close, then the Subscription Receipts are redeemed for their original purchase price plus any interest accrued on the custody account. The benefit of Subscription Receipts to the issuer is that they provide a contingent form of financing that only becomes permanent if the acquisition is completed. By contrast, a company financing the cash consideration for an acquisition by means of a traditional equity or debt offering is at risk of having incurred unnecessary dilution of its shareholders or indebtedness if the related acquisition fails to close. Subscription Receipts provide investors with flexibility to elect to invest in the post merger company and not in the company in its pre-merger form. Nasdaq has received inquiries from market participants about the possibility of the use of Subscription Receipts as a fundraising alternative for listed companies. As a result of this interest, the Exchange is now proposing to adopt listing standards for Subscription Receipts. Under the proposed rule, Nasdaq will initially list Subscription Receipts on the Capital Market pursuant to proposed Rule 5520 if they meet the following requirements: \3\ --------------------------------------------------------------------------- \3\ As described in more detail below, these requirements are each either identical or substantially similar to those in Section 102.08 of the NYSE Listed Company Manual for the initial listing of Subscription Receipts. --------------------------------------------------------------------------- (a) The security that the Subscription Receipts are exchangeable for must be listed on the Nasdaq Global Select, Global or Capital Market. (b) The issuer of the Subscription Receipts must not have received a Staff Delisting Determination with respect to the security the Subscription Receipts are exchangeable for and must not have been notified about a deficiency in any continued listing standard with respect to the issuer of the Subscription Receipts or the security the Subscription Receipts are exchangeable for, except with respect to a corporate governance requirement where the issuer has received a grace period under Rule 5810(c)(3)(E).\4\ --------------------------------------------------------------------------- \4\ Rule 5810(c)(3)(E) provides a grace period for a company to regain compliance if the company fails to meet the majority board independence or the audit committee composition requirements due to one vacancy, or fails to meet the audit committee composition requirements because an audit committee member ceases to be independent for reasons outside of her control. The grace period is until the earlier of the company's next annual shareholders meeting or one year from the event that caused the deficiency to cure the deficiency. However, if the company's next annual shareholders' meeting is held sooner than 180 days after the event that caused the deficiency, then the company has 180 days from the event that caused the deficiency to cure it. --------------------------------------------------------------------------- (c) The proceeds of the Subscription Receipts offering must be designated solely for use in connection with the consummation of a specified acquisition that is the subject of a binding acquisition agreement (the ``Specified Acquisition''). (d) The proceeds of the Subscription Receipts offering must be held in an interest-bearing custody account by an independent custodian. (e) The Subscription Receipts will promptly be redeemed for cash (i) at any [[Page 42542]] time the Specified Acquisition is terminated, or (ii) if the Specified Acquisition does not close within twelve months from the date of issuance of the Subscription Receipts, or such earlier time as is specified in the operative agreements. If the Subscription Receipts are redeemed, the holders will receive cash payments equal to their proportionate share of the funds in the custody account, including any interest earned on those funds. (f) If the Specified Acquisition is consummated, the holders of the Subscription Receipts will receive the shares of common stock for which their Subscription Receipts are exchangeable. (g) At the time of initial listing, the Subscription Receipts must have a price per Subscription Receipt of at least $4.00, a minimum Market Value of Publicly Held Shares of $100 million, 1,100,000 Publicly Held Shares \5\ and 400 holders of round lots (i.e., 100 securities). --------------------------------------------------------------------------- \5\ Listing Rule 5005(a)(34) defines publicly held shares as ``shares not held directly or indirectly by an officer, director or any person who is the beneficial owner of more than 10 percent of the total shares outstanding.'' --------------------------------------------------------------------------- (h) The sale of the Subscription Receipts and the issuance of the common stock of the issuer in exchange for the Subscription Receipts must both be registered under the Securities Act. Listed Subscription Receipts will be convertible into the primary listed class of common stock of the listed company issuing the Subscription Receipts and will thereafter be subject to all of the continued listing requirements applicable to a primary class of common stock listed on the Nasdaq. Nasdaq proposes to adopt Rule 5565 to include continued listing standards applicable to Subscription Receipts. The Exchange will immediately initiate suspension and delisting procedures under the Rule 5800 Series when (i) the number of publicly held shares is less than 100,000, (ii) the number of public holders is less than 100, (iii) the total market value of the listed Subscription Receipts is below $15 million over 30 consecutive trading days, (iv) the related common equity security ceases to be listed or receives a delisting determination from Nasdaq staff, or (v) the issuer announces that the Specified Acquisition has been terminated.\6\ An issuer of Subscription Receipts that fails these requirements will be issued a delisting letter under Rule 5810(c)(1) and will not be eligible to provide a plan to regain compliance. --------------------------------------------------------------------------- \6\ These requirements are substantially similar to those in Section 802.01B of the NYSE Listed Company Manual for the continued listing of Subscription Receipts. --------------------------------------------------------------------------- Because the issuer of the Subscription Receipt is already listing its primary common stock on Nasdaq, it must comply with the continued listing standards for common stock as well as the corporate governance requirements applicable to listed companies. In addition to the foregoing, Subscription Receipts will be subject to potential delisting for all of the reasons generally applicable to operating companies under the Rule 5800 Series. The Exchange notes that an issuer of Subscription Receipts may be subject to delisting at the time of closing of the related acquisition pursuant to Rule 5110(a), which requires a company to meet the initial listing standards following a business combination with a non-Nasdaq entity resulting in a change of control of the listed company and potentially allowing the non-Nasdaq entity to obtain a Nasdaq listing. Nasdaq proposes to amend Rule 4120(a) and IM-5250-1 to provide that whenever it halts trading in a security of a listed company pending dissemination of material news or implements any other required regulatory trading halt, the Exchange will also halt trading in any listed Subscription Receipt that is exchangeable by its terms into the common stock of such company. The Exchange will monitor activity in Subscription Receipts to identify and deter any potential improper trading activity in such securities and will adopt surveillance procedures, and make any enhancements necessary, to enable it to monitor Subscription Receipts alongside the common equity securities into which they are convertible. Additionally, the Exchange will rely on its existing trading surveillances, administered by the Exchange, or the Financial Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,\7\ which are designed to detect violations of Exchange rules and applicable federal securities laws. --------------------------------------------------------------------------- \7\ FINRA conducts cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA's performance under this regulatory services agreement. --------------------------------------------------------------------------- Finally, Nasdaq proposes to adopt fees for Subscription Receipts in proposed Rule 5920. Specifically, Nasdaq proposes to charge a $25,000 entry fee, which would include a $5,000 application fee, for the listing of a class of Subscription Receipts on the Nasdaq Capital Market. Given their short-term nature, Nasdaq does not propose to charge a separate annual fee to list Subscription Receipts and Subscription Receipts would not be included in the shares considered when calculating Nasdaq's All-inclusive Annual Listing Fee.\8\ While other securities listed on Nasdaq may have short terms, such as warrants, these securities are not required to have a short defined life and may have terms that extend for many years. In fact, no other security that can be listed on Nasdaq is required, as a condition for listing, to have a term of twelve months from issuance or less. For this reason, Nasdaq believes it is appropriate to adopt a different fee schedule for Subscription Receipts, which recognizes their required short-term nature.\9\ --------------------------------------------------------------------------- \8\ See IM-5910-1(e) and IM-5920-1(e), which impose the All- Inclusive Annual Fee based on total shares outstanding and define ``total shares outstanding'' to mean ``the aggregate number of all securities outstanding for each class of equity securities (not otherwise identified in this Rule 5900 Series) listed [on Nasdaq] . . . .'' (emphasis added). Because proposed Rule 5920(a)(7) would identify Subscription Receipts and subject them to a different fee schedule, the Subscription Receipts would not be included in total shares outstanding for this purpose. \9\ Nasdaq also proposes to make a non-substantive change to eliminate a duplicate phrase in Rule 5501. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\10\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\11\ in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. --------------------------------------------------------------------------- \10\ 15 U.S.C. 78f(b). \11\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed listing standard is consistent with Section 6(b)(5) of the Act in that it contains requirements in relation to the listing of Subscription Receipts that provide adequate protections for investors and the public interest. In particular, the Exchange believes that the quantitative requirements, which require that Subscription Receipts must have a price per share of at least $4.00, a minimum total market value of publicly held shares of $100 million, 1,100,000 publicly held shares, and 400 holders of round lots (collectively, the ``Distribution Criteria''), are designed to protect investors in that they are identical to the requirements the Commission recently approved for NYSE to list Subscription Receipts.\12\ In [[Page 42543]] approving that filing, the Commission noted that the Distribution Criteria is the same that currently applies to the listing of common stock in connection with an initial public offering under NYSE listing rules and that the $100 million market value of publicly held shares requirement is similar to the requirements for other initial listing of securities on NYSE, which should help ensure that a sufficient market, with adequate depth and liquidity, exists for the initial listing of Subscription Receipts. --------------------------------------------------------------------------- \12\ See Exchange Act Release No. 81856 (October 11, 2017), 82 FR 48296 (October 17, 2017) (approving SR-NYSE-2017-31). --------------------------------------------------------------------------- Similarly, the Exchange believes that the proposed continued listing standards for Subscription Receipts are consistent with the requirements of the Act and the protection of investors. Under the proposal, the Exchange will immediately initiate suspension and delisting procedures when (i) the number of publicly held shares is less than 100,000, (ii) the number of public holders is less than 100, (iii) the total market value of listed Subscription Receipts is below $15 million over 30 consecutive trading days, (iv) the related common equity security ceases to be listed or receives a delisting determination from Nasdaq staff, or (v) the issuer announces that the Specified Acquisition has been terminated. In addition, Subscription Receipts will be subject to potential delisting for all of the reasons generally applicable to operating companies, including those outlined in the Rule 5800 Series of Nasdaq's rules, and may also be subject to delisting at the time of closing of the related acquisition pursuant to Rule 5110(a), which requires a company to meet the initial listing standards following a business combination with a non-Nasdaq entity resulting in a change of control of the listed company and potentially allowing the non-Nasdaq entity to obtain a Nasdaq listing. The Exchange believes the application of Rule 5110(a), which requires a company to meet the initial listing standards following a business combination with a non-Nasdaq entity resulting in a change of control of the listed company and potentially allowing the non-Nasdaq entity to obtain a Nasdaq listing, will help to ensure that companies that would not otherwise qualify for original listing on the Exchange could not list, for example, by merging with a listed company. Taken as a whole, Nasdaq believes that these standards should help ensure that a sufficient market, with adequate depth and liquidity, exists for the continued listing of Subscription Receipts and are similar to the continued listing standards for other securities that have similar characteristics. Nasdaq also notes that once the Specified Acquisition has occurred and a Subscription Receipt is converted to common stock, that common stock is subject to the continued listing requirements for such common stock under Rules 5450 or 5550, as applicable. In addition to the quantitative listing requirements proposed for Subscription Receipts, the proposed initial and continued listing standards also include additional protections for Subscription Receipt holders. For example, the issuer of Subscription Receipts must be a Nasdaq-listed company that is not currently non-compliant with any applicable continued listing standard and must continue to be listed on the Exchange throughout the time the Subscription Receipts are traded on the Exchange. The proposed rules also provide that whenever Nasdaq halts trading in a security of a listed company pending dissemination of material news or implements any other required regulatory trading halt, Nasdaq will also halt trading in any listed Subscription Receipt that is exchangeable by its terms into the common stock of such company. Nasdaq believes that these additional requirements should protect investors and the public interest, consistent with Section 6(b)(5) of the Act, by assuring that information with respect to the listed company issuing the Subscription Receipts is publicly available and that the issuing company is meeting all continued listing standards, including corporate governance requirements, of the Exchange. In addition, these requirements should help assure that the Exchange has a listing relationship with, and direct access to information from, the issuer of the Subscription Receipts. Among other things, this direct relationship the Exchange has with the listed company issuing the Subscription Receipts will help to ensure that the Exchange will receive information in a timely manner to halt trading in the Subscription Receipts when there is a material news, or other regulatory, trading halt imposed on the common stock, and other securities, of the listed company. There are additional protections for investors in the proposed standards. These include that all the proceeds of the Subscription Receipts offering must be designated solely for use in connection with the consummation of a Specified Acquisition pursuant to a definitive acquisition agreement, the material terms of which would be subject to disclosure. Additionally, the proceeds of the Subscription Receipts offering must also be held in an interest-bearing custody account by an independent custodian and holders will promptly redeem the Subscription Receipts for cash, equal to the holder's proportionate share of the funds in the custody account plus any interest earned, at any time the Specified Acquisition is terminated or if the Specified Acquisition does not close within twelve months from the date of issuance of the Subscription Receipts (or such earlier time as specified in the operative agreements). If the Specified Acquisition is consummated, the holders of the Subscription Receipts will receive the shares of common stock for which their Subscription Receipts are exchangeable. Finally, the listing standards specifically state and remind issuers that the sale of Subscription Receipts and the issuance of the common stock of the issuer in exchange for the Subscription Receipts must both be registered under the Securities Act of 1933. This is important because shareholders, at the time they purchase a Subscription Receipt, are making an investment decision to also purchase the common stock of the merged listed company should the Specified Acquisition be consummated within twelve months or such shorter specified time period. Therefore, it is important to have registration and disclosure under the Securities Act of both the Subscription Receipt and the related common stock. Based on the above, Nasdaq believes that specifically setting forth the Securities Act registration requirements in its rules for listing Subscription Receipts is consistent with the requirements of Section 6(b)(5) of the Act to further investor protection and the public interest. The Exchange will also monitor activity in Subscription Receipts to identify and deter any potential improper trading activity in such securities and will adopt surveillance procedures, and make any enhancements necessary, to enable it to monitor Subscription Receipts alongside the common equity securities into which they are convertible. Since the Subscription Receipts are related to, and represent an interest in, the common stock of the post-acquisition listed company, this surveillance should help to monitor the trading activity in both the issuer's listed common stock and the Subscription Receipts. Nasdaq believes that these safeguards and standards should help to ensure that the listing, and continued listing, of any Subscription Receipts will be consistent with investor protection, the public [[Page 42544]] interest, and the maintenance of fair and orderly markets. For the above reasons, Nasdaq believes that the proposed initial and continued listing standards are consistent with the Act. Nasdaq also believes that the proposed fee set forth in Rule 5920 is consistent with Section 6(b)(4) and 6(b)(5) of the Act in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges and is not designed to permit unfair discrimination among its members and issuers and other persons using its facilities. Subscription Receipts are designed to be used for the limited purpose of raising capital for an announced merger transaction and by their terms must be redeemed within 12 months if the transaction does not close. While other securities listed on Nasdaq can have short terms, no other security that can be listed on Nasdaq is required, as a condition for listing, to have a term of twelve months from issuance or less. As such, Nasdaq believes it is not unfairly discriminatory under Section 6(b)(5) of the Act as between issuers listing other types of securities, to charge a fee that differs from its fee for other equity securities, which generally have longer terms or no fixed term, and that it is equitable and reasonable under Section 6(b)(4) of the Act to charge a single $25,000 fee, which includes a $5,000 application fee, for the listing of these securities during their lifetime. This fee is also not unfairly discriminatory because the same fee will apply to all issuers seeking to list Subscription Receipts. Further, Nasdaq operates in a competitive environment and its fees are constrained by competition in the marketplace. Other venues currently list Subscription Receipts and if a company believes that Nasdaq's fee is unreasonable it can decide either not to list the Subscription Receipts or to list them on an alternative venue. 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 that is not necessary or appropriate in furtherance of the purposes of the Act. The purpose of the proposed rule is to enhance competition by providing issuers and investors with an additional type of listed security that is not currently available on Nasdaq, but that is available on another domestic listing exchange. As such, the Exchange does not believe the proposed rule change imposes any burden on competition but instead will enhance competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act \13\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\14\ --------------------------------------------------------------------------- \13\ 15 U.S.C. 78s(b)(3)(A)(iii). \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. --------------------------------------------------------------------------- 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 rule-comments@sec.gov. Please include File Number SR-NASDAQ-2018-059 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-2018-059. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (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 website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASDAQ-2018-059, and should be submitted on or before September 12, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\15\ --------------------------------------------------------------------------- \15\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-18058 Filed 8-21-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 163 / Wednesday, August 22, 2018 / Notices 42541
proposed rule change is August 17, I. Self-Regulatory Organization’s offering is at risk of having incurred
2018. Statement of the Terms of Substance of unnecessary dilution of its shareholders
The Commission is extending the 45- the Proposed Rule Change or indebtedness if the related
day time period for Commission action The Exchange proposes to adopt acquisition fails to close. Subscription
initial and continued listing standards Receipts provide investors with
on the proposed rule change. ICC
for subscription receipts and fees for flexibility to elect to invest in the post
proposes to revise the ICC Rulebook to
their listing. merger company and not in the
provide for the clearance of an company in its pre-merger form.
additional Standard Emerging Market The text of the proposed rule change
is available on the Exchange’s website at Nasdaq has received inquiries from
Sovereign CDS contract. The market participants about the possibility
Commission finds it appropriate to http://nasdaq.cchwallstreet.com, at the
principal office of the Exchange, and at of the use of Subscription Receipts as a
designate a longer period within which fundraising alternative for listed
the Commission’s Public Reference
to take action on the proposed rule companies. As a result of this interest,
Room.
change so that it has sufficient time to the Exchange is now proposing to adopt
consider ICC’s proposed rule change. II. Self-Regulatory Organization’s listing standards for Subscription
Accordingly, the Commission, Statement of the Purpose of, and Receipts. Under the proposed rule,
Statutory Basis for, the Proposed Rule Nasdaq will initially list Subscription
pursuant to Section 19(b)(2) 5 of the Act,
Change Receipts on the Capital Market pursuant
designates October 1, 2018, as the date
In its filing with the Commission, the to proposed Rule 5520 if they meet the
by which the Commission should either
Exchange included statements following requirements: 3
approve or disapprove, or institute (a) The security that the Subscription
proceedings to determine whether to concerning the purpose of and basis for
the proposed rule change and discussed Receipts are exchangeable for must be
disapprove, the proposed rule change listed on the Nasdaq Global Select,
(File No. SR–ICC–2018–007). any comments it received on the
proposed rule change. The text of these Global or Capital Market.
For the Commission, by the Division of (b) The issuer of the Subscription
statements may be examined at the
Trading and Markets, pursuant to delegated Receipts must not have received a Staff
places specified in Item IV below. The
authority.6 Delisting Determination with respect to
Exchange has prepared summaries, set
Eduardo A. Aleman,
the security the Subscription Receipts
forth in sections A, B, and C below, of
are exchangeable for and must not have
Assistant Secretary. the most significant aspects of such
been notified about a deficiency in any
[FR Doc. 2018–18057 Filed 8–21–18; 8:45 am] statements.
continued listing standard with respect
BILLING CODE 8011–01–P A. Self-Regulatory Organization’s to the issuer of the Subscription
Statement of the Purpose of, and Receipts or the security the Subscription
Statutory Basis for, the Proposed Rule Receipts are exchangeable for, except
SECURITIES AND EXCHANGE Change with respect to a corporate governance
COMMISSION requirement where the issuer has
1. Purpose
received a grace period under Rule
[Release No. 34–83861; File No. SR– The Exchange proposes to adopt 5810(c)(3)(E).4
NASDAQ–2018–059] initial and continued listing standards (c) The proceeds of the Subscription
for the listing of Subscription Receipts Receipts offering must be designated
Self-Regulatory Organizations; The on the Nasdaq Capital Market and fees solely for use in connection with the
Nasdaq Stock Market LLC; Notice of for their listing. consummation of a specified acquisition
Filing and Immediate Effectiveness of Subscription Receipts are a financing that is the subject of a binding
Proposed Rule Change To Adopt Initial technique that has been used for many acquisition agreement (the ‘‘Specified
and Continued Listing Standards for years by Canadian public companies. Acquisition’’).
Subscription Receipts and Fees for Typically, Canadian companies use (d) The proceeds of the Subscription
Subscription Receipts as a means of Receipts offering must be held in an
Their Listing
providing cash consideration in merger interest-bearing custody account by an
August 16, 2018. or acquisition transactions. Subscription independent custodian.
Receipts are sold in a public offering (e) The Subscription Receipts will
Pursuant to Section 19(b)(1) of the that occurs after the execution of an promptly be redeemed for cash (i) at any
Securities Exchange Act of 1934 acquisition agreement. The proceeds of
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 the Subscription Receipt offering are 3 As described in more detail below, these
notice is hereby given that, on August held in a custody account and, if the requirements are each either identical or
3, 2018, The Nasdaq Stock Market LLC substantially similar to those in Section 102.08 of
related acquisition closes, the the NYSE Listed Company Manual for the initial
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Subscription Receipt holders receive a listing of Subscription Receipts.
Securities and Exchange Commission specified number of shares of the issuer. 4 Rule 5810(c)(3)(E) provides a grace period for a
(‘‘SEC’’ or ‘‘Commission’’) the proposed If the acquisition does not close, then company to regain compliance if the company fails
rule change as described in Items I, II, to meet the majority board independence or the
the Subscription Receipts are redeemed audit committee composition requirements due to
and III below, which Items have been for their original purchase price plus one vacancy, or fails to meet the audit committee
prepared by the Exchange. The any interest accrued on the custody composition requirements because an audit
Commission is publishing this notice to account. The benefit of Subscription committee member ceases to be independent for
amozie on DSK3GDR082PROD with NOTICES1
reasons outside of her control. The grace period is
solicit comments on the proposed rule Receipts to the issuer is that they until the earlier of the company’s next annual
change from interested persons. provide a contingent form of financing shareholders meeting or one year from the event
that only becomes permanent if the that caused the deficiency to cure the deficiency.
5 15 acquisition is completed. By contrast, a However, if the company’s next annual
U.S.C. 78s(b)(2).
shareholders’ meeting is held sooner than 180 days
6 17 CFR 200.30–3(a)(31). company financing the cash after the event that caused the deficiency, then the
1 15 U.S.C. 78s(b)(1). consideration for an acquisition by company has 180 days from the event that caused
2 17 CFR 240.19b–4. means of a traditional equity or debt the deficiency to cure it.
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![42542 Federal Register / Vol. 83, No. 163 / Wednesday, August 22, 2018 / Notices
time the Specified Acquisition is and will not be eligible to provide a Subscription Receipts and Subscription
terminated, or (ii) if the Specified plan to regain compliance. Receipts would not be included in the
Acquisition does not close within Because the issuer of the Subscription shares considered when calculating
twelve months from the date of issuance Receipt is already listing its primary Nasdaq’s All-inclusive Annual Listing
of the Subscription Receipts, or such common stock on Nasdaq, it must Fee.8 While other securities listed on
earlier time as is specified in the comply with the continued listing Nasdaq may have short terms, such as
operative agreements. If the standards for common stock as well as warrants, these securities are not
Subscription Receipts are redeemed, the the corporate governance requirements required to have a short defined life and
holders will receive cash payments applicable to listed companies. In may have terms that extend for many
equal to their proportionate share of the addition to the foregoing, Subscription years. In fact, no other security that can
funds in the custody account, including Receipts will be subject to potential be listed on Nasdaq is required, as a
any interest earned on those funds. delisting for all of the reasons generally condition for listing, to have a term of
applicable to operating companies twelve months from issuance or less.
(f) If the Specified Acquisition is
under the Rule 5800 Series. The For this reason, Nasdaq believes it is
consummated, the holders of the
Exchange notes that an issuer of appropriate to adopt a different fee
Subscription Receipts will receive the
Subscription Receipts may be subject to schedule for Subscription Receipts,
shares of common stock for which their
delisting at the time of closing of the which recognizes their required short-
Subscription Receipts are exchangeable. related acquisition pursuant to Rule term nature.9
(g) At the time of initial listing, the 5110(a), which requires a company to
Subscription Receipts must have a price meet the initial listing standards 2. Statutory Basis
per Subscription Receipt of at least following a business combination with The Exchange believes that its
$4.00, a minimum Market Value of a non-Nasdaq entity resulting in a proposal is consistent with Section 6(b)
Publicly Held Shares of $100 million, change of control of the listed company of the Act,10 in general, and furthers the
1,100,000 Publicly Held Shares 5 and and potentially allowing the non- objectives of Section 6(b)(5) of the Act,11
400 holders of round lots (i.e., 100 Nasdaq entity to obtain a Nasdaq listing. in particular, in that it is designed to
securities). Nasdaq proposes to amend Rule promote just and equitable principles of
(h) The sale of the Subscription 4120(a) and IM–5250–1 to provide that trade, to remove impediments to and
Receipts and the issuance of the whenever it halts trading in a security perfect the mechanism of a free and
common stock of the issuer in exchange of a listed company pending open market and a national market
for the Subscription Receipts must both dissemination of material news or system, and, in general to protect
be registered under the Securities Act. implements any other required investors and the public interest.
regulatory trading halt, the Exchange The Exchange believes that the
Listed Subscription Receipts will be will also halt trading in any listed proposed listing standard is consistent
convertible into the primary listed class Subscription Receipt that is with Section 6(b)(5) of the Act in that it
of common stock of the listed company exchangeable by its terms into the contains requirements in relation to the
issuing the Subscription Receipts and common stock of such company. The listing of Subscription Receipts that
will thereafter be subject to all of the Exchange will monitor activity in provide adequate protections for
continued listing requirements Subscription Receipts to identify and investors and the public interest. In
applicable to a primary class of common deter any potential improper trading particular, the Exchange believes that
stock listed on the Nasdaq. activity in such securities and will the quantitative requirements, which
Nasdaq proposes to adopt Rule 5565 adopt surveillance procedures, and require that Subscription Receipts must
to include continued listing standards make any enhancements necessary, to have a price per share of at least $4.00,
applicable to Subscription Receipts. The enable it to monitor Subscription a minimum total market value of
Exchange will immediately initiate Receipts alongside the common equity publicly held shares of $100 million,
suspension and delisting procedures securities into which they are 1,100,000 publicly held shares, and 400
under the Rule 5800 Series when (i) the convertible. Additionally, the Exchange holders of round lots (collectively, the
number of publicly held shares is less will rely on its existing trading ‘‘Distribution Criteria’’), are designed to
than 100,000, (ii) the number of public surveillances, administered by the protect investors in that they are
holders is less than 100, (iii) the total Exchange, or the Financial Industry identical to the requirements the
market value of the listed Subscription Regulatory Authority (‘‘FINRA’’) on Commission recently approved for
Receipts is below $15 million over 30 behalf of the Exchange,7 which are NYSE to list Subscription Receipts.12 In
consecutive trading days, (iv) the related designed to detect violations of
common equity security ceases to be Exchange rules and applicable federal 8 See IM–5910–1(e) and IM–5920–1(e), which
listed or receives a delisting securities laws. impose the All-Inclusive Annual Fee based on total
determination from Nasdaq staff, or (v) Finally, Nasdaq proposes to adopt shares outstanding and define ‘‘total shares
fees for Subscription Receipts in outstanding’’ to mean ‘‘the aggregate number of all
the issuer announces that the Specified securities outstanding for each class of equity
Acquisition has been terminated.6 An proposed Rule 5920. Specifically, securities (not otherwise identified in this Rule 5900
issuer of Subscription Receipts that fails Nasdaq proposes to charge a $25,000 Series) listed [on Nasdaq] . . . .’’ (emphasis added).
these requirements will be issued a entry fee, which would include a $5,000 Because proposed Rule 5920(a)(7) would identify
application fee, for the listing of a class Subscription Receipts and subject them to a
delisting letter under Rule 5810(c)(1) different fee schedule, the Subscription Receipts
of Subscription Receipts on the Nasdaq would not be included in total shares outstanding
Capital Market. Given their short-term for this purpose.
amozie on DSK3GDR082PROD with NOTICES1
5 Listing Rule 5005(a)(34) defines publicly held
shares as ‘‘shares not held directly or indirectly by nature, Nasdaq does not propose to 9 Nasdaq also proposes to make a non-substantive
an officer, director or any person who is the charge a separate annual fee to list change to eliminate a duplicate phrase in Rule
beneficial owner of more than 10 percent of the 5501.
10 15 U.S.C. 78f(b).
total shares outstanding.’’ 7 FINRA conducts cross-market surveillances on
6 These requirements are substantially similar to 11 15 U.S.C. 78f(b)(5).
behalf of the Exchange pursuant to a regulatory
those in Section 802.01B of the NYSE Listed services agreement. The Exchange is responsible for 12 See Exchange Act Release No. 81856 (October
Company Manual for the continued listing of FINRA’s performance under this regulatory services 11, 2017), 82 FR 48296 (October 17, 2017)
Subscription Receipts. agreement. (approving SR–NYSE–2017–31).
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![42544 Federal Register / Vol. 83, No. 163 / Wednesday, August 22, 2018 / Notices
interest, and the maintenance of fair and C. Self-Regulatory Organization’s file number should be included on the
orderly markets. Statement on Comments on the subject line if email is used. To help the
For the above reasons, Nasdaq Proposed Rule Change Received From Commission process and review your
believes that the proposed initial and Members, Participants, or Others comments more efficiently, please use
continued listing standards are No written comments were either only one method. The Commission will
consistent with the Act. post all comments on the Commission’s
solicited or received.
Nasdaq also believes that the internet website (http://www.sec.gov/
proposed fee set forth in Rule 5920 is III. Date of Effectiveness of the rules/sro.shtml). Copies of the
consistent with Section 6(b)(4) and Proposed Rule Change and Timing for
6(b)(5) of the Act in that it is designed submission, all subsequent
Commission Action
to provide for the equitable allocation of amendments, all written statements
Because the foregoing proposed rule with respect to the proposed rule
reasonable dues, fees, and other charges change does not: (i) Significantly affect
and is not designed to permit unfair change that are filed with the
the protection of investors or the public Commission, and all written
discrimination among its members and interest; (ii) impose any significant
issuers and other persons using its communications relating to the
burden on competition; and (iii) become proposed rule change between the
facilities. Subscription Receipts are
operative for 30 days from the date on Commission and any person, other than
designed to be used for the limited
which it was filed, or such shorter time
purpose of raising capital for an those that may be withheld from the
as the Commission may designate, it has
announced merger transaction and by public in accordance with the
become effective pursuant to Section
their terms must be redeemed within 12 provisions of 5 U.S.C. 552, will be
19(b)(3)(A)(iii) of the Act 13 and
months if the transaction does not close. available for website viewing and
subparagraph (f)(6) of Rule 19b–4
While other securities listed on Nasdaq printing in the Commission’s Public
thereunder.14
can have short terms, no other security Reference Room, 100 F Street NE,
At any time within 60 days of the
that can be listed on Nasdaq is required, Washington, DC 20549 on official
filing of the proposed rule change, the
as a condition for listing, to have a term business days between the hours of
Commission summarily may
of twelve months from issuance or less. 10:00 a.m. and 3:00 p.m. Copies of such
temporarily suspend such rule change if
As such, Nasdaq believes it is not filing also will be available for
it appears to the Commission that such
unfairly discriminatory under Section
action is: (i) Necessary or appropriate in inspection and copying at the principal
6(b)(5) of the Act as between issuers
the public interest; (ii) for the protection office of the Exchange. All comments
listing other types of securities, to
charge a fee that differs from its fee for of investors; or (iii) otherwise in received will be posted without change.
other equity securities, which generally furtherance of the purposes of the Act. Persons submitting comments are
have longer terms or no fixed term, and If the Commission takes such action, the cautioned that we do not redact or edit
that it is equitable and reasonable under Commission shall institute proceedings personal identifying information from
Section 6(b)(4) of the Act to charge a to determine whether the proposed rule comment submissions. You should
single $25,000 fee, which includes a should be approved or disapproved. submit only information that you wish
$5,000 application fee, for the listing of IV. Solicitation of Comments to make available publicly. All
these securities during their lifetime. submissions should refer to File
Interested persons are invited to
This fee is also not unfairly Number SR–NASDAQ–2018–059, and
submit written data, views, and
discriminatory because the same fee should be submitted on or before
arguments concerning the foregoing,
will apply to all issuers seeking to list September 12, 2018.
including whether the proposed rule
Subscription Receipts. Further, Nasdaq
change is consistent with the Act. For the Commission, by the Division of
operates in a competitive environment Trading and Markets, pursuant to delegated
Comments may be submitted by any of
and its fees are constrained by authority.15
the following methods:
competition in the marketplace. Other
venues currently list Subscription Eduardo A. Aleman,
Electronic Comments
Receipts and if a company believes that Assistant Secretary.
• Use the Commission’s internet
Nasdaq’s fee is unreasonable it can comment form (http://www.sec.gov/
[FR Doc. 2018–18058 Filed 8–21–18; 8:45 am]
decide either not to list the Subscription rules/sro.shtml); or BILLING CODE 8011–01–P
Receipts or to list them on an alternative • Send an email to rule-comments@
venue. sec.gov. Please include File Number SR–
B. Self-Regulatory Organization’s NASDAQ–2018–059 on the subject line.
Statement on Burden on Competition Paper Comments
The Exchange does not believe that • Send paper comments in triplicate
the proposed rule change will impose to Secretary, Securities and Exchange
any burden on competition that is not Commission, 100 F Street NE,
necessary or appropriate in furtherance Washington, DC 20549–1090.
of the purposes of the Act. The purpose
of the proposed rule is to enhance All submissions should refer to File
competition by providing issuers and Number SR–NASDAQ–2018–059. This
investors with an additional type of
amozie on DSK3GDR082PROD with NOTICES1
13 15 U.S.C. 78s(b)(3)(A)(iii).
listed security that is not currently 14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
available on Nasdaq, but that is 4(f)(6) requires a self-regulatory organization to give
available on another domestic listing the Commission written notice of its intent to file
exchange. As such, the Exchange does the proposed rule change at least five business days
prior to the date of filing of the proposed rule
not believe the proposed rule change change, or such shorter time as designated by the
imposes any burden on competition but Commission. The Exchange has satisfied this
instead will enhance competition. requirement. 15 17 CFR 200.30–3(a)(12).
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Document Created: 2018-08-22 00:38:06
Document Modified: 2018-08-22 00:38:06
| 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 | 83 FR 42541 |
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