57282 Federal Register / Vol. 85, No. 179 / Tuesday, September 15, 2020 / Notices publicly. All submissions should refer The Commission is publishing this will help to ensure that Restrictive to File Number SR–IEX–2020–13 and order to solicit comments on the Market Companies have sufficient should be submitted on or before proposed rule change from interested investor base and public float to support October 6, 2020. persons and to institute proceedings fair and orderly trading on the 12 For the Commission, by the Division of pursuant to Section 19(b)(2)(B) of the Exchange. Specifically, the Exchange 6 Trading and Markets, pursuant to delegated Act to determine whether to approve proposes to adopt a definition of authority.21 or disapprove the proposed rule change. ‘‘Restrictive Market’’ 13 and to apply additional initial listing requirements to J. Matthew DeLesDernier, II. Exchange’s Description of the a Restrictive Market Company listing on Assistant Secretary. Proposed Rule Change the Exchange in connection with an IPO [FR Doc. 2020–20256 Filed 9–14–20; 8:45 am] The Exchange states that in recent or a business combination.14 The BILLING CODE 8011–01–P years the lack of transparency from Exchange also proposes to prohibit a certain emerging markets has raised Restrictive Market Company from listing concerns with respect to listed emerging SECURITIES AND EXCHANGE on the Nasdaq Capital Market in market companies regarding the 15 COMMISSION connection with a Direct Listing, but accuracy of disclosures, accountability, to allow a Restrictive Market Company and access to information, particularly [Release No. 34–89799; File No. SR– to list on the Nasdaq Global Select NASDAQ–2020–027] when the companies are based in a Market or Nasdaq Global Market in jurisdiction that has secrecy laws, connection with a Direct Listing, Self-Regulatory Organizations; The blocking statutes, national security laws provided that such company meets all Nasdaq Stock Market LLC; Order or other laws or regulations restricting applicable initial listing requirements Instituting Proceedings To Determine access to information by regulators of for such market. Whether To Approve or Disapprove a U.S.-listed companies (‘‘Restrictive Proposed Rule Change To Apply Market’’).7 The Exchange further states A. Definition of Restrictive Market Additional Initial Listing Criteria for that such concerns can be compounded The Exchange proposes to adopt a Companies Primarily Operating in when a company lists on the Exchange new definition of Restrictive Market in Restrictive Markets through an initial public offering Listing Rule 5005(a)(37).16 As proposed, (‘‘IPO’’) or a business combination with a Restrictive Market would mean a September 9, 2020. a small offering size or a low public jurisdiction that Nasdaq determines to float percentage, as the company may I. Introduction have secrecy laws, blocking statutes, not develop sufficient public float, national security laws or other laws or On May 29, 2020, The Nasdaq Stock investor base, and trading interest to regulations restricting access to Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) provide the depth and liquidity information by regulators of U.S.-listed filed with the Securities and Exchange necessary to promote fair and orderly companies in such jurisdiction.17 In Commission (‘‘Commission’’), pursuant trading, which may result in a security 8 to Section 19(b)(1) of the Securities that is illiquid. The Exchange states 12 See id. 1 Exchange Act of 1934 (‘‘Act’’) and Rule that such securities may trade 13 See infra note 17 and accompanying text. 19b–4 thereunder,2 a proposed rule infrequently, in a more volatile manner, 14 The Exchange states that, currently, it may rely change to apply additional listing and with a wider bid-ask spread, all of upon its discretionary authority under Nasdaq criteria to companies primarily which may lead to trading at a price that Listing Rule 5101 to deny initial listing or apply 9 additional or more stringent criteria when it is operating in a jurisdiction that has may not reflect true market value. In concerned that a small offering size for an IPO may secrecy laws, blocking statutes, national addition, the Exchange states that less not reflect the company’s initial valuation or may security laws or other laws or liquid securities may be more not ensure sufficient liquidity to support trading in regulations restricting access to susceptible to price manipulation and the secondary market. Pursuant to Rule 5101, Nasdaq has broad discretionary authority over the information by regulators of U.S.-listed that, in particular, the risk of price initial and continued listing of securities in Nasdaq companies. The proposed rule change manipulation due to insider trading is in order to maintain the quality of and public was published for comment in the more acute with respect to a company confidence in its market, to prevent fraudulent and Federal Register on June 12, 2020.3 On that principally administers its business manipulative acts and practices, to promote just and equitable principles of trade, and to protect July 21, 2020, pursuant to Section in a Restrictive Market (‘‘Restrictive investors and the public interest. Nasdaq may use 19(b)(2) of the Act,4 the Commission Market Company’’) because regulatory such discretion to deny initial listing, apply designated a longer period within which investigations into price manipulation, additional or more stringent criteria for the initial to approve the proposed rule change, insider trading, and compliance or continued listing of particular securities, or suspend or delist particular securities based on any disapprove the proposed rule change, or concerns may be impeded, and, event, condition, or circumstance that exists or institute proceedings to determine therefore, investor protections and occurs that makes initial or continued listing of the whether to disapprove the proposed remedies may be limited.10 As a result, securities on Nasdaq inadvisable or unwarranted in rule change.5 the Exchange states that it believes that the opinion of Nasdaq, even though the securities Restrictive Market Companies present meet all enumerated criteria for initial or continued listing on Nasdaq. See Nasdaq Listing Rule 5101. 21 17 CFR 200.30–3(a)(12). unique potential risks to U.S. 15 Nasdaq defines ‘‘Direct Listing’’ as the listing 1 15 U.S.C. 78s(b)(1). investors.11 of ‘‘companies that have sold common equity 2 17 CFR 240.19b–4. The Exchange states that it is now securities in private placements, which have not 3 See Securities Exchange Act Release No. 89027 proposing rule changes that it believes been listed on a national securities exchange or (June 8, 2020), 85 FR 35962 (‘‘Notice’’). Comments traded in the over-the-counter market pursuant to on the proposed rule change can be found at: FINRA Form 211 immediately prior to the initial https://www.sec.gov/comments/sr-nasdaq-2020- whether to approve or disapprove, the proposed pricing.’’ See Nasdaq Listing Rule IM–5315–1. rule change. 027/srnasdaq2020027.htm. 16 6 The Exchange proposes to renumber current 4 15 U.S.C. 78s(b)(2). 15 U.S.C. 78s(b)(2)(B). paragraphs (a)(37) through (a)(46) of Listing Rule 7 See Notice, supra note 3, at 35962. 5 See Securities Exchange Act Release No. 89358 5005 in connection with the addition of the 8 (July 21, 2020), 85 FR 45275 (July 27, 2020). The See id. at 35962 and 35965. definition of Restrictive Market. See Notice, supra Commission designated September 10, 2020 as the 9 See id. at 35962 and 35965–66. note 3, at 35963. date by which the Commission shall approve or 10 See id. at 35962 and 35966. 17 See id. at 35962–63; proposed Listing Rule disapprove, or institute proceedings to determine 11 See id. at 35965. 5005(a)(37). VerDate Sep<11>2014 16:57 Sep 14, 2020 Jkt 250001 PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 E:\FR\FM\15SEN1.SGM 15SEN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 85, No. 179 / Tuesday, September 15, 2020 / Notices 57283 determining whether a Company’s Restrictive Market Company listing on Listing Rule 5110(a) 28 or IM–5101–2,29 business is principally administered in the Exchange in connection with an IPO with a Restrictive Market Company to a Restrictive Market, Nasdaq may that is subject to the proposed rule have a minimum Market Value of consider the geographic locations of the would also need comply with all other Unrestricted Publicly Held Shares 30 Company’s: (i) Principal business applicable listing requirements.25 following the business combination segments, operations or assets; (ii) board equal to the lesser of (i) $25 million or The Exchange states that it has and shareholders’ meetings; (iii) (ii) 25% of post-business combination headquarters or principal executive observed that Restrictive Market entity’s Market Value of Listed offices; (iv) senior management and Companies listing on Nasdaq in Securities. A Company subject to the employees; and (v) books are records.18 connection with an IPO with an offering proposed rule would also need comply The Exchange states that it would size below $25 million or public float with all other applicable listing consider these factors holistically, ratio below 25% have a high rate of requirements.31 recognizing that a company’s compliance concerns.26 The Exchange headquarters may not be the office from further states that it believes the 28 Nasdaq Listing Rule 5110(a) (Business which it conducts its principal business proposed listing requirement would Combinations with non-Nasdaq Entities Resulting 19 in a Change of Control) sets forth requirements activities. The Exchange also states help ensure that Restrictive Market applicable to a Company that engages in a business that the proposed definition would Companies seeking to list on the combination with a non-Nasdaq entity, resulting in capture both foreign private issuers Exchange have sufficient investor base a change of control of the Company and potentially based in Restrictive Markets and and public float to support fair and allowing the non-Nasdaq entity to obtain a Nasdaq Listing.