Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the National Association of Securities Dealers, Inc. To Provide Nasdaq Issuers Temporary Relief From Listing Requirements Relating to the Bid Price for Continued Inclusion and the Market Value of the Public Float

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44857; File No. SR-NASD-2001-61]

Self-Regulatory Organizations; Notice of Filing and Immediate

Effectiveness of Proposed Rule Change by the National Association of

Securities Dealers, Inc. To Provide Nasdaq Issuers Temporary Relief

From Listing Requirements Relating to the Bid Price for Continued

Inclusion and the Market Value of the Public Float

September 27, 2001.

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, 2001, the National Association of Securities Dealers,

Inc. (``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc.

(``Nasdaq''), filed with the Securities and Exchange Commission

(``Commission'') the proposed rule change as described in Items I, II,

and III below, which Items have been prepared by Nasdaq. Nasdaq asserts

that the proposed rule change meets the criteria set forth in Rule 19b-

4(f)(6),\3\ which renders this proposal effective upon receipt of this

filing by the Commission. The Commission is publishing this notice to

solicit comments on the proposed rule change from interested persons.

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\1\ 15 U.S.C. 78s(b)(1).

\2\ 17 CFR 240.19b-4.

\3\ 17 CFR 240.19b-4(f)(6).

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I. Self-Regulatory Organization's Statement of the Terms of

Substance of the Proposed Rule

Nasdaq has filed with the Commission a proposed rule change to

temporarily suspend, through January 2, 2002, the application of the

continued inclusion bid price and market value of public float

requirements set forth in NASD Rules 4310(c)(4), 4310(c)(7),

4450(a)(2), 4450(a)(5), 4450(b)(3), and 4450(b)(4).

II. Self-Regulatory Organization's Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, Nasdaq included statements

concerning the purpose of and basis for the

[[Page 50486]]

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. Nasdaq 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 purpose of the proposed rule change is to provide issuers

temporary relief from the continued inclusion bid price and market

value of public float requirements. Nasdaq's continued inclusion bid

price requirements are set forth in NASD Rules 4310(c)(4), 4450(a)(5),

and 4450(b)(4), and its continued inclusion market value of public

float requirements are set forth in NASD Rules 4310(c)(7), 4450(a)(2),

and 4450(b)(3). NASD Rule 4310(c)(8)(B) provides that, if a company

fails to meet the applicable bid price or market value of public float

requirement for 30 consecutive business days, it will be notified and

provided a 90-day grace period to regain compliance. Compliance is

achieved by meeting the applicable standards for ten consecutive

business days during the 90-day compliance period. If the company fails

to comply with the applicable standards, delisting procedures are

initiated under the NASD Rule 4800 series.

Nasdaq has stated that, given the extraordinary market conditions

surrounding the September 11 tragedy, there has been a recent

escalation in the number of companies falling short of the bid price

and market value of public float requirements. Due to the dramatic

increase in the number of companies potentially impacted, Nasdaq has

determined that the bid price and market value of public float

requirements should be suspended through January 2, 2002. Under this

proposal, companies would not be cited for bid price or market value of

public float deficiencies, and companies in the 90-day grace period or

in the review process for bid price or market value of public float

deficiencies would be taken out of the deficiency process with respect

to those requirements. Nasdaq has stated that no deficiencies will

accrue during the suspension period. During this time, Nasdaq staff

will consider whether it is appropriate to recommend further, and more

permanent, action.

2. Statutory Basis

Nasdaq believes that the proposed rule change is consistent with

the provisions of Section 15A(b)(6) of the Act \4\ in that it is

designed to prevent fraudulent and manipulative acts and practices and

to protect investors and the public interest. Nasdaq reiterates that

the proposed rule change is designed to minimize impact on issuers in

the marketplace, while providing greater transparency and consistency.

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\4\ 15 U.S.C. 78o-3(b)(6).

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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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed

Rule Change Received From Members, Participants, or Others

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing

for Commission Action

Nasdaq asserts that the proposed rule change is effective upon

filing pursuant to Section 19(b)(3)(A) of the Act \5\ and paragraph

(f)(6) of Rule 19b-4 thereunder,\6\ because the proposed rule change:

(1) Does not significantly affect the protection of investors or the

public interest; (2) does not impose any significant burden on

competition; and (3) does not become operative for 30 days after the

date of the filing, or such shorter time as the Commission may

designate if consistent with the protection of investors and the public

interest. Nasdaq has requested that the Commission waive the 30 day

preoperative period in order to provide companies immediate relief,

given the current extraordinary market conditions. In addition, Rule

19b-4(f)(6) requires the 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. Nasdaq also requests that the Commission, for the same

reasons, waive the five-day notice requirement.

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\5\ 15 U.S.C. 78s(b)(3)(A).

\6\ 17 CFR 240.19(b)-4(f)(6).

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The Commission finds that it is consistent with the protection of

investors and the public interest to waive the 30-day pre-operative

period.\7\ The Commission believes that the potential benefits of the

proposed rule change could be lost if the Commission does not

accelerate the operative date of the rule, as Nasdaq might otherwise be

required under NASD rules to commence delisting proceedings against

certain issuers. Moreover, the Commission finds that waiving the 30-day

pre-operative requirement will have no adverse impact on the public

interest. The Commission believes that, notwithstanding the accelerated

operative date, the public will have ample opportunity to learn about

and analyze the consequences of the proposed rule change. The

Commission also notes that the suspension of the Nasdaq listing

requirements relating to the bid price for continued inclusion and the

market value of the public float is temporary; any subsequent action

taken by Nasdaq to suspend or alter its listing standards will also be

subject to the rule filing process under Section 19(b) of the Act.\8\

For these same reasons, the Commission also waives the five-day notice

requirement.

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\7\ For purposes only of accelerating the operative date of this

proposal, the Commission has considered the proposed rule's impact

on efficiency, competition, and capital formation. See 15 U.S.C.

78c(f).

\8\ 15 U.S.C. 78s(b).

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At any time within 60 days of this filing, the Commission may

summarily abrogate this proposal if it appears to the Commission that

such action is necessary of appropriate in the public interest, for the

protection of investors, or otherwise in furtherance of the purposes of

the Act.

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. Persons making written submissions

should file six copies thereof with the Secretary, Securities and

Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609.

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 inspection and copying in the

Commission's Public Reference Room. Copies of such filing will also be

[[Page 50487]]

available for inspection and copying at the principal office of the

NASD. All submissions should refer to File No. SR-NASD-2001-61 and

should be submitted by October 24, 2001.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\9\

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\9\ 17 CFR 200.30-3(a)(12).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01-24702 Filed 10-2-01; 8:45 am]

BILLING CODE 8010-01-M