Recently, the SEC approved the rule change to rename the Nasdaq National Market as the Nasdaq Global Market and to create the Nasdaq Global Select Market, a new tier within the Nasdaq Global Market with higher initial listing standards. Even though Nasdaq’s transition to an exchange has been delayed, it is proceeding with the Global Select Market – and the renaming of National Market to Global Market – so that these changes will be effective July 1st. The rule filing to do so under the NASD rules was filed a few days ago. As for the timing of Nasdaq’s transition to an exchange, it now looks like that might take effect on August 1st – see this Nasdaq Head Trader Alert.

Here are some issues not addressed by previous blogs about the impact of this transition:

– Delisting – Once Nasdaq becomes an exchange, a company will have to file a Form 25 to delist. The Nasdaq has filed a rule change to incorporate the SEC’s new requirements relating to delisting (Rule 12d2-2) into the rules of the Nasdaq exchange.

– Rule 144 – One issue that occurred to me is that when Nasdaq becomes an exchange, will affiliates who sell under Rule 144 have to file a Form 144 (if required under 144(h)) with both the SEC and Nasdaq as Rule 144(h) refers to the “principal exchange on which such securities are so admitted”? Our Rule 144 expert Bob Barron has authored a great 6-page article on this topic, located in our “Rule 144″ Practice Area. Nasdaq also has updated its FAQs on Exchange Registration to address the Form 144 question, where the penultimate paragraph states:

“After NASDAQ becomes operational as a national securities exchange, Section 16 and Form 144 filings related to Nasdaq-listed securities will have to be filed with NASDAQ. However, NASDAQ has requested, and expects to receive, relief from the Securities and Exchange Commission that will allow the electronic filing of Section 16 reports and Forms 144 through the SEC’s EDGAR system to satisfy the obligation to file these reports with NASDAQ. A copy of Section 16 and Form 144 Filings not made using the SEC’s EDGAR system should be sent to Listing Qualifications.”

More on Option Backdating

Following up on this blog from a few weeks back, we have been uploading articles, research reports and Form 8-Ks to the “Timing of Stock Option Grants” Practice Area on CompensationStandards.com at an incredulous rate. The most recent media reports are tossing out numbers like “10%” as to the number of companies at risk. That’s one figure cited in a NPR segment noted in this excellent memo – and this article quotes the Professor who uncovered this scandal as predicting that 20% of companies don’t timely report their option grants on Form 4! These numbers are so high! Maybe I am in denial, but I simply don’t believe that it could be so bad.

And as Mike Melbinger blogged about yesterday (and as noted in this WSJ article), McAfee just dismissed its General Counsel because of stock option “improprieties” during 2000. I imagine this will not be the last in-house lawyer to be handed his/her head – and reputation – over this type of issue.

What About Rule 10b5-1 Trades?

With the option backdating scandal being kicked off by an academic study from last year, perhaps it’s time to look at what other potential problems have been uncovered by studies. This recent LA Times article delves into a study by a Stanford Professor who claims that stock sales made under Rule 10b5-1 plans precede bad news more often than good news.

I was surprised at the results of this study, but perhaps the period of time covered (i.e. 2003 and before) may offer an explanation? We have posted a copy of the study and several related articles in our “Rule 10b5-1″ Practice Area. Thanks to Keith Bishop for keeping me on my toes!