California Corporations Commissioner Certifies the NASDAQ Capital Market Under Two Key Provisions

By Liz Blong

For those of you that didn't see Corporate Counsel yesterday, there's an item about how the California Commissioner of Corporations has certified the NASDAQ Capital Market under CGCL Section 25100(o) to exempt from qualification securities listed on this exchange.  The Corporate Counsel blog entry provides a detailed analysis of the exemption, especially in light of NSMIA.  "While Congress' enactment of the NSMIA in 1996 seemed to make this exemption irrelevant, it remained important because it is unclear whether the federal preemption of state qualification requirements pursuant to the NSMIA extends to options, warrants and other rights to acquire a listed security. Because Section 25100(o) also excepts warrants and other rights to acquire a security listed or approved for listing on a certified exchange, the exemption continues to be relevant and important."  The item goes on to explain how the certification also "provides an exemption from qualification for offers and sales of securities in non-issuer (i.e, secondary) transactions" and is of particular importance because "it covers not just the covered security (or an equal or senior security) but any security issued by a person that is the issuer of a security listed on a certified exchange."  Finally, the exemption from the usury provisions of the California Constitution for evidences of indebtedness and the purchasers or holders thereof in CGCL Section 25117(a) is now extended to the NASDAQ Capital Market.  The blog goes on to suggest that "the Commissioner's certification should therefore make it easier for smaller publicly traded companies to issue debt without concern for California's constitutional usury limits."

The California Commissioner's Release No. 87-C (Revised) may be found here. 

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