BILL ANALYSIS
AB 991
Page 1
Date of Hearing: May 4, 2009
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Pedro Nava, Chair
AB 991 (Silva) - As Amended: April 20, 2009
SUBJECT : Corporations: NASDAQ: national securities exchange.
SUMMARY : Updates numerous references to the NASDAQ Market
System and other stock exchanges, markets and regulatory bodies
in the California Corporations Code. Specifically, this bill :
1)Changes references to the NASDAQ Stock Market to reflect its
current name, the National Securities Exchange.
2)Changes references to the American Stock Exchange to reflect
its current name, the NYSE Amex.
3)Changes references to the National Association of Securities
Dealers to reflect its current name, the Financial Industry
Regulatory Authority.
4)Makes other technical and conforming changes.
EXISTING LAW :
1)Defines the term "listed corporation" to include a corporation
with shares listed on the NYSE or the American Stock Exchange
or securities listed on the National Market System of the
NASDAQ Stock Market. (Corporations Code, Section 301.5(d),
all other references will be to the Corporations Code)
2)Defines the term "dissenting shares" for purposes of a
reorganization or short-form merger as shares which are not
listed on any national securities exchange certified by the
Commissioner of Corporations under subdivision (o) of Section
25100 or listed on the National Market System of the NASDAQ
Stock Market. (Section 1300(b))
3)Defines a "publicly traded corporation" as an issuer as
defined in Section 3 of the Securities Exchange Act of 1934
that has at least one class of securities listed or admitted
for trading on a national securities exchange, on the National
or Small Cap Markets of the NASDAQ Stock Market, on the
OTC-Bulletin Board, or on the electronic service operated by
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the Pink Sheets, LLC. (Section 1502.1)
4)Defines a "publicly traded foreign corporation" as a foreign
issuer as defined in Section 3 of the Securities Exchange Act
of 1934 that has at least one class of securities listed or
admitted for trading on a national securities exchange, on the
National or Small Cap Markets of the NASDAQ Stock Market, on
the OTC-Bulletin Board, or on the electronic service operated
by the Pink Sheets, LLC. (Section 2217.1(b))
5)Defines an "eligible rollup transaction" as a rollup
transaction in which the new securities issued are either
listed or approved for listing on a national securities
exchange or on the National Market System of the NASDAQ Stock
Market, where the national securities exchange and the NASDAQ
Stock Market have been certified by the commissioner under
subdivision (o) of Section 25100 if the exchange or NASDAQ
Stock Market imposes procedural requirements to protect
limited partner rights. (Section 25014.7(a))
6)Provides an exemption from the registration requirements of
Section 25110, 25120 and 25130 for any security listed or
approved for listing upon notice of issuance on a national
securities exchange or on the National Market System of the
NASDAQ Stock Market (or any successor to that entity) if the
exchange or NASDAQ Stock Market has been certified by rule or
order of the commissioner. The exemption does not apply to
securities issued in a rollup transaction unless it is an
eligible rollup transaction under Section 25014.7. Section
25100(o) also sets forth various minimum listing criteria that
form the basis for certification by the commissioner, which
criteria reference the NASDAQ Stock Market. (Section 25100(o))
7)Provides an exemption from the registration requirements of
Section 25130 for any security listed upon notice of issuance
on a national securities exchange or on the National Market
System of the NASDAQ Stock Market (or any successor to that
entity) if the exchange or NASDAQ Stock Market has been
certified by rule or order of the commissioner. (Section
25101(a))
8)Exempts from constitutional usury provisions if the issuer of
an evidence of indebtedness has any security listed or
approved for listing upon notice of issuance on a national
securities exchange or on the National Market System of the
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NASDAQ Stock Market (or any successor to that entity), if the
exchange or NASDAQ Stock Market has been certified by the
commissioner. (Section 25117(a))
9)Sets forth the application requirements for a broker dealer to
become licensed by notification to the commissioner if the
broker-dealer is a member of the NYSE Amex, the Pacific Stock
Exchange or the National Association of Securities Dealers.
(Section 25211(b))
10)Excludes any security listed on the National Market System of
the NASDAQ Stock Market or any national securities exchange
located outside California from the commissioner's authority
to suspend over-the-counter trading of any security in,
California or summarily suspend all trading on a national
securities exchange located in California. (Section 25219)
11)Requires all investment adviser applications, amendments,
reports, notices, related filings and fees to be filed
electronically through a specified system operated by the
National Association of Securities Dealers. (Section 25231(b))
12)Requires the commissioner to make available to any person
certain information about a broker-dealer or agent regulated
under the Corporations Code, which information includes that
made available through the Public Disclosure Program of the
National Association of Securities Dealers, Incorporated
(NASD). Section 25247(f) makes inapplicable specific
provisions of the Business & Professions Code to the
Department of Corporations if it uses a national, uniform
application adopted or approved for use by the SEC, the North
American Securities Administrators Association, or the
National Association of Securities Dealers Regulation, Inc.
that is required for participation in the Central Registration
Depository or the Investment Adviser Registration Depository.
(Section 25247(a))
FISCAL EFFECT : None.
BACKGROUND:
NASDAQ presently has 2,978 listed companies that are
incorporated in the State of California and another 448
companies that, while not incorporated in California, have their
primary business address in California. NASDAQ companies list
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on one of three different market tiers: the NASDAQ Global Select
Market, which has the highest initial listing standards of any
market in the world and is a subset of the NASDAQ Global Market;
the NASDAQ Global Market, which is the immediate successor of
the former NASDAQ National Market; and the NASDAQ Capital
Market, which is home to many prominent small and mid-cap
companies. The tiers differ only with respect to the
quantitative listing standards for each tier. Securities on
each tier are subject to the same corporate governance
requirements, including requirements related to shareholder
approval and independent directors, and are subject to the same
vigorous regulation, including ongoing review for public
interest concerns that warrant the delisting of a company that
otherwise meets the listing requirements.
NEED FOR BILL :
The sponsor of this bill, the Business Law Section of the State
Bar of California believes AB 991 is necessary to simply correct
technical inaccuracies in the names of entities and markets
referenced in various provisions of the Corporations Code
brought about by recent changes in such entities and markets.
On January 13, 2006, the Securities and Exchange Commission
(SEC) approved the application of NASDAQ to become a national
securities exchange under Section 6 of the Securities Exchange
Act of 1934, as amended. Pursuant to such authority, NASDAQ
began operating as a national securities exchange on August 1,
2006. Previously, NASDAQ was not considered a national
securities exchange, but securities quoted on NASDAQ's "National
Market System" (which has certain listing standards) were
treated similarly to securities listed on other national
securities exchanges for various purposes under California
securities laws. With NASDAQ's change in status, it is no
longer necessary to distinguish between national securities
exchanges and NASDAQ.
Effective July 1, 2006, NASDAQ renamed the "NASDAQ National
Market" (sometimes referred to as the "National Market System of
the NASDAQ Stock Market") as the "NASDAQ Global Market" and
created a new segment within the NASDAQ Global Market called the
"NASDAQ Global Select Market". (References to the NASDAQ Global
Market include those securities listed on the NASDAQ Global
Market and the NASDAQ Global Select Market.) Similarly, on
September 27, 2005, NASDAQ renamed the "NASDAQ Small Cap Market"
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as the "NASDAQ Capital Market." In April 2007, the SEC amended
Rule 146 under Section 18 of the Securities Act of 1933 to
designate securities listed or authorized for listing on the
NASDAQ Capital Market as "covered securities" for purposes of
Section 18 of the Securities Act, which has the effect of
exempting securities listed on the NASDAQ Capital Market from
state law registration requirements and gives NASDAQ Capital
Market securities the same recognition as securities listed on
the New York Stock Exchange (the " NYSE Amex ") and the NASDAQ
Global Market.
The "Emerging Company Marketplace" previously operated by the
Amex was closed on May 11, 1995.
In October 2008, the corporate entity that owns the NYSE
acquired the Amex, after which the Amex became a wholly-owned
subsidiary of the NYSE and was renamed "NYSE Alternext US LLC"
(effective March 13, 2009). On March 18, 2009, the NYSE
announced that the SEC has approved a further name change of
"NYSE Alternext" to "NYSE Amex LLC".
The Pacific Exchange (sometimes referred to as the "Pacific
Stock Exchange" and historically designated as a national
securities exchange by the SEC) was acquired by Archipelago
Holdings in September 2005, which in turn was acquired by the
NYSE in February 2006. The NYSE now operates the Pacific
Exchange as "NYSE Arca," which continues to be designated as a
national securities exchange under Section 6 of the Securities
Exchange Act of 1934. NYSE Arca does not maintain a market for
"small corporate offering registration" securities as had been
maintained by the Pacific Exchange.
On July 26, 2007, the SEC approved the consolidation of the
enforcement arm of the NYSE and the National Association of
Securities Dealers, Inc. (the " NASD ") and its subsidiary, the
National Association of Securities Dealers Regulation, Inc. (the
" NASDR "), to form the Financial Industry Regulatory Authority
(" FINRA "). The NASD previously was the corporate parent of The
NASDAQ Stock Market, Inc. and the NASDR was the regulatory body
governing NASDAQ and broker-dealers who trade NASDAQ securities.
FINRA is the successor to the NASD, and the NASD and the NASDR
have no ongoing separate existence.
Certain provisions of the Corporations Code incorrectly refer to
the "OTC-Bulletin Board" and the "Pink Sheets, LLC," which,
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until very recently were correctly known as the "OTC Bulletin
Board" and the "Pink Sheets LLC." In April 2008, Pink Sheets
LLC announced that it changed its name to "Pink OTC Markets
Inc."
On August 9, 2007, the Commissioner of Corporations promulgated
Commissioner's Release 87-C, pursuant to which the Commissioner
certified the NASDAQ Global Market of the NASDAQ Stock Market
LLC as a national securities exchange pursuant to subdivision
(o) of California Corporations Code Section 25100.
Representatives of the Commissioner also recently indicated
their intent to promulgate an additional release certifying the
NASDAQ Capital Market as a national securities exchange for the
same purposes.
REGISTERED SUPPORT / OPPOSITION :
Support
Business Law Section of the California State Bar - Sponsor
NASDAQ OMX Group
Opposition
None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081