The SEC has approved Nasdaq’s application to register as a national securities exchange. The SEC expects this transition to occur in April.

A company whose securities are listed on a national securities exchange must register those securities under Section 12(b) of the Exchange Act. All others (which meet specified requirements as to total assets and the number of securities holders) must register under Section 12(g), including those whose securities are currently traded on Nasdaq. When Nasdaq begins operating as a national securities exchange, securities listed on the Nasdaq exchange will need to be registered under Section 12(b).

Registration under Section 12(b) provides information concerning the issuer and its securities comparable to that required for registration under Section 12(g). To avoid the unnecessary cost of approximately 3,200 Nasdaq National Market and Capital Market issuers registering under Section 12(b), Nasdaq has proposed to the SEC (and on behalf of listed financial institutions, the appropriate banking regulators) that it be permitted to file a single application to register under Section 12(b) all securities traded on Nasdaq on the day before Nasdaq begins operating as a national securities exchange. The SEC is reviewing this proposal.

Nasdaq proposes providing each issuer ten business days to opt-out of Nasdaq’s application to the SEC and the banking regulators. If an issuer opts-out, its securities would not be eligible to be listed on the Nasdaq exchange and instead would be traded on the pink sheets or the OTC Bulletin Board until the issuer registers its securities under Section 12(b) in connection with listing them on the Nasdaq exchange or another national securities exchange.

There are no material differences in the regulation of issuers whose securities are registered under Section 12(b) and those whose securities are registered under Section 12(g). The only differences relate to (i) how the issuer identifies itself on the cover of its Form 10 K and (ii) the process surrounding a decision to delist or deregister. When Nasdaq begins operating as a national securities exchange, listed companies will identify themselves on the cover of Form 10 K as Section 12(b) companies.

Nasdaq’s initial and continuing listing standards and corporate governance standards will be substantially the same as its current standards. Furthermore, any security trading on Nasdaq on the day before Nasdaq begins operating as a national securities exchange will automatically qualify for initial listing on the Nasdaq exchange.

The SEC has not yet announced when or whether the Exchange Act filing number of each Nasdaq listed company will change. Historically, Section 12(g) companies received numbers beginning with a “0-“, and Section 12(g) companies received a number beginning with a “1-“.

The SEC’s findings, opinion and order granting Nasdaq’s application are available at http://www.sec.gov/litigation/opinions/34-53128.pdf.

Nasdaq’s proposed rule to allow it, on behalf of all listed companies, to register all listed securities under Section 12(b) is available at http://www.sec.gov/rules/sro/nasd/34-53362.pdf.

For further information, please contact Peter M. Menard at (213) 617-5483.