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Libraries:
Staff Interpretation Letters
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Identification Number
1014
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Rule 4350(a): NASDAQ shall have the ability to provide exemptions from Listing Rule 4350 to a Foreign Private Issuer when provisions of this Rule are contrary to a law, rule or regulation of any public authority exercising jurisdiction over such issuer
or contrary to generally accepted business practices in the issuer’s country of domicile.
Rule 4350A(c)*: Each issuer shall maintain a sufficient number of independent directors on its board of directors to satisfy the audit committee requirement as set forth in Listing Rule 4350(d)(2).
Rule 4350A(d)(2)(A)1: Each issuer must have, and certify that it has and will continue to have, an audit committee of at least three members, comprised solely of independent directors, each of whom is able to read and understand fundamental financial
statements, including the company’s balance sheet, income statement and a cash flow statement or will become able to do so within a reasonable period of time after his or her appointment to the audit committee. Additionally, each issuer must certify that
it has, and will continue to have, at least one member of the audit committee that has past employment, experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results
in the individual’s financial sophistication, including being a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.
Rule 4350(f): Each issuer shall provide for a quorum as specified in its by-laws for any meeting of the holders of common stock; provided, however, that in no case shall such quorum be less than 33 1/3% of the outstanding shares of the company’s common
voting stock.
Relevant Facts: A Korean company, which seeks to list its ADRs on NASDAQ, sought exemptions from NASDAQ’s independent director, audit committee, and quorum rules.
Issue: Is the company eligible for exemptions from these NASDAQ’s rules?
Determination: Yes. For each requested exemption, the company's home country counsel indicated that the company’s practice was in full compliance with relevant laws, rules and regulations and the generally accepted business practices in Korea. Counsel
further stated that compliance with the NASDAQ rules would be contrary to generally accepted business practices in Korea.
Based on the company’s representations, NASDAQ determined to grant the requested exemptions to Rules 4350A(c), 4350A(d) and 4350(f). Notwithstanding the grant of these exemptions, NASDAQ noted that, foreign companies must be in compliance with NASDAQ’s
new audit committee rules no later than July 31, 2005, as required by Securities and Exchange Rule 10A-3. As such, the exemptions to Rules 4350A(c) and 4350A(d) expire on July 31, 2005. If the company believes it is eligible for an exemption under Rule 10A-3,
it should reapply prior to that date.
* Rules 4350A(c) and 4350(A)(d)(2)(A) were subsequently renumbered as Rules 4350-1(c) and 4350-1(d)(2)(A), respectively.
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Publication Date*:
7/31/2012
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Identification Number:
1014
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