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 its own stock option backdating investigation and the investigation of its former parent company.* Based on a Panel decision, the company was scheduled
to be suspended, pending delisting, by the Panel, because the Panel was at the limit of its discretionary authority. The Listing Council exercised its discretionary authority by calling for review the Panel’s decision, and by also determining to stay any future
Panel determinations to suspend the company’s securities from trading, pending further action by the Listing Council.
Determination: The company was suspended, pending delisting, by the Listing Council because the company was not current in all required public filings. Furthermore, in its submission to the Listing Council, the company noted that it was
dependent on its former parent to complete its financial restatements. Given that the former parent company could not demonstrate compliance within 60 days, the company would also not be able to demonstrate compliance within the limits of the Listing Council’s
discretion of 60 days. The Listing Council has considered the extraordinary circumstances that many companies find themselves in and has undertaken a facts and circumstances analysis in this case to determine if additional remedies are appropriate.
The Listing Council considered many factors, including, but not limited to, the following:
- The company took appropriate steps once the potential stock option problem had been identified. The company informed its Audit Committee, who, in turn, directed management to conduct a review of the company’s stock option issuance practices since the date
of the company’s initial public offering. The company’s investigation was concluded in a month’s time.
- Upon the conclusion of the company’s internal investigation, even though no material exceptions were identified, the company adopted remedial measures that strengthened the stock options granting process to avoid a re-occurrence of this problem.
- Once the preliminary results of the former parent’s Special Committee were discussed with the company’s Board, 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.
- Once the preliminary results of the former parent’s Special Committee were discussed with the company’s Board, the company removed those Board members implicated in the investigation.
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. Accordingly,
the Listing Council finds that the Panel’s determination to delist the company’s securities for failure to comply with the filing requirement, but staying the suspension pending further action by the Listing Council, was appropriate at the time of the decision.
However, after a review of the record in this matter, the Listing Council notes that the company is wholly dependent on receiving information from its former parent company before it can move forward and finalize its restatements. When asked by the Listing
Council for a definitive date when the company could demonstrate compliance, the company noted that it was unable to provide a specific date when it could file its delinquent periodic reports so as to demonstrate compliance with Listing Rule 4310(c)(14). While
the Listing Council is extremely sympathetic to the company’s plight, the Listing Council sees no reason to exercise its discretionary authority to provide additional time for compliance. The Listing Council finds that the company’s plan of compliance is not
sufficiently definitive and the company has not provided adequate assurances that the delinquent periodic reports could be filed within the next 60 days, the limit of the Listing Council’s discretion. Based on the foregoing, the Listing Council has determined
to suspend, pending delisting, the company’s securities from The NASDAQ Stock Market because the company does not comply with the filing requirement of Listing Rule 4310(c)(14).
* Prior to its initial public offering, the company was a wholly owned subsidiary of its former parent company.