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  Listing Council Decision 2009-1
Identification Number 607
Rule 5250(c)(1):  A company shall timely file all required periodic financial reports with the Commission through the EDGAR System or with the Other Regulatory Authority. A company that does not file through the EDGAR System shall supply to NASDAQ two (2) copies of all reports required to be filed with the Other Regulatory Authority or email an electronic version of the report to NASDAQ at continuedlisting@nasdaq.com. All required reports must be filed with NASDAQ on or before the date they are required to be filed with the Commission or Other Regulatory Authority. Annual reports filed with NASDAQ shall contain audited financial statements.
 
Issue:  The company was not able to file its delinquent periodic SEC reports due to an internal investigation of company practices relating to stock option grants to officers and directors, and related matters. The Panel granted the company an extension to file its delinquent reports, which was the full extent of the Panel’s discretionary authority. The company appealed the Panel decision to the Listing Council, and by separate letter, the company requested that the Listing Council call for review the Panel decision with a stay of delisting. The Listing Council notified the company that it had called for review the Panel decision and issued a stay of delisting pending further Council action.
 
Determination:  Affirmed. The decision of the Panel was appropriate at the time it was rendered. The Listing Council also exercised its discretionary authority to grant the company an additional extension of time to demonstrate compliance with the filing requirement, but not to the full extent of the Listing Council’s discretion.
 
In reaching its determination, the Listing Council applied a facts and circumstances analysis, and found that based on its analysis, this company should be given additional time to become compliant with NASDAQ’s filing requirement.  The Listing Council considered many factors, including, but not limited to, the following:
  • The company reacted quickly and took appropriate steps once the potential problem was identified.  After the board of directors was informed of evidence indicating backdating issues, the board of directors appointed the Special Committee, which began an independent investigation, with the help of outside consultants, to determine the depth and breadth of the problem.
  • The company cooperated with regulatory authorities and timely notified the investing public of its independent investigation and the need for a restatement of its financial statements.
  • The company has agreed to adopt the remedial measures recommended by the Special Committee.
The Listing Council also considered that the company was not in any other distress and that, but for the options issue, the company was ready to remedy its filing delinquency and, based upon historical financial information, appeared to have the financial strength to continue to meet the maintenance standards of the Global Market.  The Listing Council understands that the Committee’s investigation has been slowed by the magnitude of the problem and the company’s dependence on outside factors to complete the process.  The Listing Council was also particularly cognizant, and considered, that the Panel had exhausted its ability to provide the company with an additional extension of time.
 
While the Listing Council takes seriously the requirement to file accurate and reliable financial statements and the concomitant purpose to provide investors with current information, when faced with similar cases historically, the Listing Council balanced its analysis with the extraordinary circumstances in which many companies found themselves. The Listing Council, however, believes that stock options backdating is not a novel issue at this point in time. As such, companies should have long ago taken appropriate action to determine whether their stock option grant practices are problematic, and to extent issues are found, restate any affected financial statements and remediate the issues, both expeditiously. Accordingly, the Listing Council is willing to grant a short extension of time pursuant to Listing Rule 5820(d)(4) to demonstrate compliance with NASDAQ’s filing requirement; however, the Listing Council is unwilling to grant the company the full extent of time available to it under NASDAQ’s rules.
 
The Listing Council also takes notice of the fact that the company has become deficient under Listing Rule 5620 because it did not solicit proxies for or hold its annual meeting by December 31, 2008. As such, the Listing Council finds that such failure to solicit proxies for and hold an annual meeting constitutes a new and separate deficiency. In order to assure that the company has an adequate opportunity to address this deficiency, the Listing Council remands this deficiency back to the Panel for further review and action if the company regains compliance with the filing requirement. Staff shall instruct the company to respond to the Panel with respect to this deficiency.
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 607
material_search_footer*The Publication Date reflects the date of first inclusion in the Reference Library, which was launched on July 31, 2012, or a subsequent update to the material. Material may have been previously available on a different Nasdaq web site.
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