SEC Approves Modifications to Nasdaq's Press Release Requirements

The SEC has approved a Nasdaq proposal to modify certain of Nasdaq's rules pertaining to its press release requirements for listed companies.  The proposal can be found online.  The modification will allow companies to make disclosure either through a press release or by filing a Form 8-K, where required by SEC rules, and thus eliminate duplicative requirements from Nasdaq's disclosure rules. (Note that, in those cases where a Form 8-K is not required to be filed under SEC rules, Nasdaq rules will still require an issuer to make public disclosure through a press release.) The modifications include the following amendments:

• Rules 5250(b)(3), 5810(b), 5840(k) and IM-5810-1, which require disclosure by press release of notifications regarding a company's compliance with the Nasdaq listing standards. The modifications will allow a company to make a public announcement by "filing a Form 8-K, where required by SEC rules, or by issuing a press release." However, a company that is late in filing a required periodic report with the SEC would still be required to issue a press release announcing that it has received notice that it does not meet that requirement and would not be permitted to fulfill this requirement only by filing a Form 8-K. (In each case, notification to Nasdaq MarketWatch should be made at least ten minutes prior to public notification. Note that Nasdaq recently changed its rules to provide that if the public release of material information is made outside of Nasdaq market hours, companies must notify MarketWatch of the material information prior to 6:50 a.m. ET.) Nasdaq is not changing Rule 5840(j), regarding the voluntary delisting of a company, because the press release requirement in that rule is required by Exchange Act Rule 12d2-2(c), nor is it changing Rule 5635(c)(4) and IM-5365-1, which mandate that a company relying on the inducement exception to the requirement to obtain shareholder approval for equity compensation awards must "disclose in a press release" specific information about the equity award.
• Rule 5635(f), which requires a company to make a public announcement through the news media when it receives an exception to the shareholder approval requirements because compliance would jeopardize the company's financial viability. Instead, under the amendment, companies may make this announcement "by filing a Form 8-K, where required by SEC rules, or by issuing a press release." Nasdaq is retaining its current requirement that companies that receive an exemption are also required to mail this notice to all shareholders at least ten days before issuing securities in reliance on the exception.
• Rule 5225(a)(3), which requires a company to "publicize through, at a minimum, a public announcement through the news media" any change in the terms of a listed unit. This rule is being modified to allow the company to "make a public announcement by filing a Form 8-K, where required by SEC rules, or by issuing a press release" of any change in the terms of the unit.
• Rule 5250(c)(2), which requires a company that is a foreign private issuer to disclose interim financial results "in a press release and on a Form 6-K." The requirement that this information be published in a press release is being eliminated, although the Form 6-K is still required. A foreign private issuer would still be free to disclose this information in a press release if it chooses.
• Rule 5250(b)(2), which requires that a company issue a press release announcing the receipt of a "going concern" qualification in an audit opinion. This requirement is being eliminated as duplicative of disclosure already provided in the 10-K and ARS. However, if a company fails to include the audit opinion in its annual filing, Nasdaq would consider the filing deficient and would move to delist the company on that basis.
• Rules 5810(b) and 5840(k), which require companies to notify multiple Nasdaq departments before they issue certain disclosures. Under the amendment, the company need notify only MarketWatch, which will notify other Nasdaq departments when necessary.

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