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  Listing Council Decision 2006-10
Identification Number 641
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 stated that its filing of the Form 10-K for the fiscal year ended December 31, 2005 would be delayed to allow for the completion of an ongoing internal investigation, by a Special Committee of its board of directors, of company practices related to stock option grants to officers and directors, and related matters. The Panel delisted the company’s securities based on a filing delinquency.
Determination: The Listing Council has considered that the Panel discretion under Listing Rule 4802(b) is limited to 90 days from the date of the Panel’s original decision, not to exceed 180 days from the date of the staff’s determination, and that such limit of discretion, did not allow this Panel the ability to provide the company with additional relief. Accordingly, the Listing Council finds that the Panel’s determination to delist the company’s securities from The NASDAQ Stock Market, for failure to comply with the filing requirement of Rule 4310(c)(14), was appropriate at the time of the decision. However, after a review of the record in this matter, the Listing Council has determined to exercise its discretionary authority, under Rule 4802(b)*, to: (i) remove the suspension of trading, and (ii) grant the company a 60 day exception period to demonstrate compliance with all of the 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 company informed its Audit Committee, who, in turn, immediately began an internal investigation, with the help of outside consultants, to determine the depth and breadth of the problem.
  • The company promptly notified regulatory authorities and the investing public of its internal investigation. Once the preliminary results of the Special Committee were discussed with the Board, the company removed and replaced its Chairman of the Board and CFO.
  • After the investigation was concluded, the company adopted all remedial measures recommended by the Audit Committee. Upon the conclusion of the internal 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.
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 understood that the restatement process had been slowed by the perceived lack of guidance, but that the SEC’s Office of Chief Accountant had recently provided interpretive guidance on the matter. The company has already provided the SEC’s Office of Chief Accountant with an opportunity to preview its analysis and disclosure for stock options, before the company will issue its restatements.
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).
* Listing Rule 4802(b) allows the Listing Council to grant exceptions for a period not to exceed 60 days from the date of the Listing Council Decision or 180 days from the date of the Panel Decision with respect to the deficiency for which the exception is granted, in each case where it deems appropriate. If Staff determines that there are no public interest concerns that would preclude the company from rejoining the Global Market, the Listing Council finds that the company should be immediately re-instated to trading and shall be provided with a 60 day extension, to become current in its periodic reporting obligation pursuant to Listing Rule 4310(c)(14). If by the end of the exception period, the company has not complied with Listing Rule 4310(c)(14), the company’s securities will be resuspended at the opening of business the following day, and a Form 25, notification of removal from listing, will then be filed with the SEC as required by SEC Rule 19d-1. If, at any time during the exception period, the company becomes deficient in a continued listing  requirement of the Global Market, other than the filing requirement, the company will not be given an opportunity to be heard, its securities will be re-suspended, and a Form 25 will be filed with the SEC.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 641
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