Section 0780-04-02-.10 - NASDAQ/NMS EXEMPTION(1) Exemption. By the authority delegated to the commissioner in T.C.A. §§ 48-1-103(b)(11) and 48-1-116, the following transactions are determined to be exempt from T.C.A. §§ 48-1-104 and 48-1-113: Any sale of securities that are designated or approved for designation upon notice of issuance on the NASDAQ/NMS, any other security of the same issuer that is of senior or substantially equal rank, any security called for by subscription rights or warrants so designated or approved, or any warrant or right to purchase or subscribe to any of the foregoing.
(2) The commissioner: (a) Shall have the authority by rule or order to deny, suspend, or revoke the exemption created by this Rule as to a specific issuer or category of securities; and(b) May rescind this Rule based on a finding that; 1. The requirements of the NASDAQ/NMS have materially changed from those set forth in paragraph (3) of this Rule and no longer afford equivalent investor protection; or2. The requirements of the NASDAQ/NMS as set forth in paragraph (3) of this Rule are not applied or enforced sufficiently to afford protection to investors.(3)(a)1. The FINRA shall require at least the following minimum standards to be met for the designation of an issuer's securities on the quotation system: | Alt. No. 1 | Alt. No. 2 |
Net Tangible Assets | $4,000,000 | $12,000,000 |
Public Float | 500, 000 | 1,000,000 |
Pre-Tax Income | 750,000 | ---------------------- |
Net Income | 400,000 | ------------------------ |
Shareholders | 800/400 | 800/400 |
(The minimum number of shareholders under each alternative is eight hundred (800) for companies with five hundred thousand (500,000) to one million (1,000,000) shares publicly held, and four hundred (400) for companies with over one million (1,000,000) shares publicly held and with daily trading volume in excess of two thousand (2,000) shares per day for six (6) months.)
Market Value of Float | 3,000,000 | 15,000,000 |
Minimum Bid | $5/share | ------------- |
Operating History | -------------- | 3 years |
2. The rules of the FINRA shall require at least two (2) authorized market makers for each issuer.3. For purposes of this subparagraph (3)(a), the term "net tangible assets" is meant to include the value of patents, copyrights, and trademarks but to exclude the value of goodwill.(b) The FINRA shall require at least the following minimum corporate governance standards for its domestic issuers; 1. Distribution of Annual and Interim Reports. (i) Each issuer shall distribute to shareholders copies of an annual report containing financial statements of the company and its subsidiaries. The report shall be distributed to shareholders in a reasonable period of time prior to the company's annual meeting of shareholders and shall be filed with the FINRA at the time it is distributed to shareholders.(ii) Each issuer which is subject to SEC Rule 13a-13 (17 C.F.R. §240.13a-13) shall make available to shareholders copies of quarterly reports including statements of operating results either prior to or as soon as practicable following the company's filing of its Form 10-Q with the SEC. If the form of such quarterly report differs from the Form 10-Q, both the quarterly report and the Form 10-Q shall be filed with the FINRA. The statement of operations contained in quarterly reports shall disclose at a minimum, any substantial items of an unusual or nonrecurrent nature, net income, and the amount of estimated federal taxes.(iii) Each issuer which is not subject to SEC Rule 13a-13 ( 17 C.F.R. §240.13a-13) and which is required to file with the SEC or another federal or state regulatory authority interim reports relating primarily to operations and financial position shall make available to shareholders reports which reflect the information contained in such interim reports. Such reports shall be made available to shareholders either before or as soon as practicable following filing with the appropriate regulatory authority. If the form of the interim report made available to shareholders differs from that filed with the regulatory authority, both the report to shareholders and the report to the regulatory authority shall be filed with the FINRA.2. Independent Directors. Each issuer shall maintain a minimum of two (2) independent directors on its board of directors. For purposes of this subparagraph (3)(b), "independent director" shall mean a person other than an officer or employee of the issuer or its subsidiaries or any other individual having a relationship which, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.3. Audit Committee. Each issuer shall establish and maintain an audit committee, a majority of the members of which shall be independent directors.4. Shareholder meetings. Each issuer shall hold an annual meeting of shareholders and shall provide notice of such meeting to the FINRA.5. Quorum. Each issuer shall provide for a quorum as specified in its bylaws for any meeting of the holders of common stock; provided, however, that in no case shall such quorum be less than thirty-three and one-third percent (33 1/3%) of the outstanding shares of the issuer's common voting stock.6. Solicitation of Proxies. Each issuer shall solicit proxies and provide proxy statements for all meetings of shareholders and shall provide copies of such proxy solicitation to the FINRA.7. Conflicts of Interest. Each issuer shall conduct an appropriate review of all related party transactions on an ongoing basis and shall use the issuer's audit committee or a comparable body for the review of potential conflict of interest situations where appropriate.8. Shareholders' Approval Policy. Each issuer shall require shareholder approval of the issuance of securities in connection with the following: (i) Options plans or other special remuneration plans for directors, officers, or key employees.(ii) Actions resulting in a change in control of the issuer.(iii) The acquisition, direct or indirect, of a business, a company, tangible or intangible assets, or property or securities representing any such interests: (I) From a director, officer, or substantial security holder of the issuer (including its subsidiaries and affiliates), or from any company or party in which one of such persons has a direct or indirect interest; and(II) Where the present or potential issuance of common stock or securities convertible into common stock could result in an increase in outstanding common shares of twenty-five percent (25%) or more.(c) Voting Rights. 1. The FINRA rules shall provide that no rule, stated policy, practice, or interpretation shall permit the authorization for designation on the NASDAQ/NMS ("authorization") or the continuance of the authorization, of any common stock or other equity security of a domestic issuer if, on or after September 1, 1988, the issuer issues any class of security or takes other corporate action that would have the effect of nullifying, restricting, or disparately reducing the per share voting rights of holders of an outstanding class or classes of common stock of such issuer registered pursuant to Section 12 of the 1934 Act.2. For purposes of part (3)(c)1. of this Rule, the following shall be presumed to have the effect of nullifying, restricting, or disparately reducing the per share voting rights of an outstanding class or classes of common stock: (i) Corporate action to impose any restriction on the voting power of shares of the common stock of the issuer held by a beneficial owner or record holder based on the number of shares held by such beneficial owner or record holder;(ii) Corporate action to impose any restriction on the voting power of shares of the common stock of the issuers held by a beneficial owner or record holder based on the length of time such shares have been held by such beneficial owner or record holder;(iii) Any issuance of securities through an exchange offer by the issuer for shares of an outstanding class of common stock of the issuer, in which the securities issued have voting rights greater than or less than the per share voting rights of any outstanding class of the common stock of the issuer; or(iv) Any issuance of securities pursuant to a stock dividend, or any other type of distribution of stock in which the securities issued have voting rights greater than the per share voting rights of any outstanding class of the common stock of the issuer.3. For purposes of part (3)(c)1. of this Rule, the following, standing alone, shall be presumed not to have the effect of nullifying, restricting, or disparately reducing the per share voting rights of holders of an outstanding class or classes of common stock: (i) The issuance of securities pursuant to an initial registered public offering;(ii) The issuance of any class of securities, through a registered public offering, with voting rights not greater than the per share voting rights of any outstanding class of common stock of the issuer;(iii) The issuance of any class of securities to effect a bona fide merger or acquisition, with voting rights not greater than the per share voting rights of any outstanding class of the common stock of the issuer; or(iv) Corporate action taken pursuant to state law requiring a state's domestic corporation to condition the voting rights of a beneficial or record holder of a specified threshold percentage of the corporation's voting stock on the approval of the corporation's independent shareholders.4. Definitions. For the purposes of this subparagraph (3)(c), the terms below shall have the following meanings and the rules of the FINRA shall include such definitions for purposes of the prohibition in part (3)(c)1. of this Rule: (i) "Common Stock" shall include any security of an issuer designated as common stock and any security of an issuer, however designated, which by statute or by its terms, is common stock (e.g., a security which entitles the holders thereof to vote generally on matters submitted to the issuer's security holders for a vote).(ii) "Equity security" shall include any equity security defined as such pursuant to SEC Rule 3a11-1 ( 17 C.F.R. §240.3a11-1).(iii) "Domestic issuer" shall mean an issuer that is not a "foreign private issuer" as defined in SEC Rule 3b-4 (17 C.F.R. §240.3b-4) .(iv) "Security" shall include any security defined as such pursuant to Section 3(a)(10) of the 1934 Act, but shall exclude any class of security having a preference or priority over the issuer's common stock as to dividends, interest payments, redemption, or payments in liquidation, if the voting rights of such securities only become effective as a result of specified events, not relating to an acquisition of the common stock of the issuer, which reasonably can be expected to jeopardize the issuer's financial ability to meet its payment obligation to the holders of that class of securities.(d) Maintenance Criteria. After authorization for designation of a security on the NASDAQ/NMS, the issuer of such security must meet the following criteria in order for such designation to continue in effect: 1. The issuer of the security has net tangible assets of at least: (i) Two million dollars ($2,000,000) if the issuer sustained losses from continuing operations and/or net losses in two (2) of its three (3) most recent fiscal years; or(ii) Four million dollars ($4,000,000) if the issuer has sustained losses from continuing operations and/or net losses in three (3) of its four (4) most recent fiscal years;2. There are at least two hundred thousand (200,000) publicly held shares;3. There are at least four hundred (400) shareholders or at least three hundred (300) shareholders of round lots; and4. The aggregate market value of publicly held shares is at least one million dollars ($1,000,000).Tenn. Comp. R. & Regs. 0780-04-02-.10
Original rule filed September 28, 1990; effective November 12, 1990. Repeal and new rule filed March 16, 2015; effective 6/14/2015.Authority: T.C.A. §§ 48-1-103(b)(11), 48-1-104, 48-1-113, 48-1-115, 48-1-116, §3(a)(10) and §12 of the Securities Exchange Act of 1934, 17 C.F.R. §240.3a11-1, 17 C.F.R. § 240.3b-4, and 17 C.F.R. § 240.13a-13.