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  Listing Council Decision 2007-7
Identification Number 633
Rule 4310(c)(14): The issuer shall file with NASDAQ three (3) copies of all reports and other documents filed or required to be filed with the Securities and Exchange Commission (“Commission”). This requirement is considered fulfilled for purposes of this paragraph if the issuer files the report or document with the Commission through the Electronic Data Gathering, Analysis, and Retrieval system. An issuer that is not required to file reports with the Commission shall file with NASDAQ three (3) copies of reports required to be filed with the appropriate regulatory authority. All required reports shall be filed with NASDAQ on or before the date they are required to be filed with the Commission or appropriate 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. Being at the limit of its discretionary authority, the Panel determined to suspend, pending delisting, the company’s securities for failure to file its delinquent periodic reports. Subsequently, the Listing Council exercised its discretionary authority to call the decision for review and stay the suspension.
Determination: The decision of the Panel was appropriate at the time it was rendered. The Listing Council also used its discretionary authority to grant the company an additional 60 day extension of time to demonstrate compliance with all Global Market continued listing requirements. In reaching its determination, the Listing Council applied a facts and circumstances analysis, and found that based on its analysis, that 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 stock option problem was identified. The management of the company began an internal review. After the Board was informed of evidence indicating backdating issues, the Audit Committee and later a Special Committee, began an independent investigation, with the help of outside consultants, to determine the depth and breadth of the problem.
  • The company co-operated with regulatory authorities and timely notified the investing public of its independent investigation.
  • Upon the conclusion of the independent investigation, the company promptly notified the investing public of its need to restate its financial statement and cautioned investors not to rely on previously filed financial information.
  • After the investigation was concluded, the company took steps to remove the culpable individuals; to that end, the company’s former CFO and Chief Accounting Officer were asked to resign from their respective positions, and have been replaced.
  • The company added two new independent board members to provide additional expertise and reconstituted its compensation committee.
  • The company has either adopted, or committed to adopt, all other remedial measures recommended by the Special Committee.
  • The company has been proactive in keeping investors informed by providing unaudited quarterly and year end financial information and holding investor calls covering earnings.
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 restatement process 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, and would have provided the company more time if available under the rules. 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, the Listing Council balanced its analysis with the extraordinary circumstances in which many companies find themselves. The Listing Council is sympathetic to the company in that it is not the only company that is currently ensnared in the thorny issues surrounding the potential restatement of financial statements as a result of the accounting for stock option grants. The Listing Council has considered the extraordinary circumstances that many companies find themselves in and will undertake a facts and circumstances analysis in each case to determine if additional remedies are appropriate.
Based upon the record, the Listing Council recognized that the company has been pro-active in trying to regain its status as a good corporate citizen, and believed that such diligence should be rewarded with an extension of time to demonstrate compliance. As such, pursuant Listing Rule 4802(b), the Listing Council finds that it is appropriate in this instance to exercise its discretionary authority and provide the company with a short extension of time to demonstrate compliance with Listing Rule 4310(c)(14). Based on the foregoing, the Listing Council affirms the decision of the Panel to suspend the company’s securities, and grants the company an exception of 60 days to file its delinquent periodic reports and restatements.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 633
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