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  Listing Council Decision 2007-2
Identification Number 638
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 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 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 the completion of financial restatements by its parent company. Given that the 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 was identified when its Audit Committee, engaged an outside law firm, who in turn engaged independent forensic accountants to assist in conducting an internal investigation of the company’s option grant practices.
  • The company promptly self-reported to the appropriate regulatory authorities when it contacted the SEC Division of Enforcement
  • The company has frozen all stock option exercises until its restated financial statements are filed.
  • Once the internal investigation was completed, 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 parent’s Special Committee were discussed with the Board, the company removed those Board members implicated in the investigation.
  • Once the preliminary results of the 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 statements and cautioned investors not to rely on previously filed financial information.
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 parent company before it can move forward and finalize its own 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 predict when it could file its delinquent periodic reports so as to demonstrate compliance with Listing Rule 4310(c)(14). As such, the Listing Council sees no reason
to exercise its discretion, to provide additional time for compliance, in this particular instance. 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).
Publication Date*: 7/31/2012 Mailto Link Identification Number: 638
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