Commission gives green light to NASDAQ free IR service bundle for new listings and those switching from NYSE
As expected, the SEC has given the go-ahead to NASDAQ’s proposed offering of complimentary IR services worth up to $169,000 a year to newly listed companies and those switching from the NYSE.
The ruling follows approval in August of a rule change at the NYSE allowing up to $100,000 worth of services for all Big Board-listed companies, not just new listings.
As with the NYSE decision, the SEC approved NASDAQ’s free services bundle in light of the ‘competitive environment’ for attracting listings.
‘We’re obviously very pleased,’ says Joe Christinat, spokesperson for NASDAQ. ‘The ruling gives us the chance to showcase our communications, governance and market intelligence offerings.’
The decision has attracted criticism, however, from firms offering alternative services to public companies.
‘I think it’s unfortunate,’ says Darrell Heaps, CEO and co-founder of Q4 Web Systems, an online IR consultancy. ‘NASDAQ companies now have to select from a narrow set of choices.’
Heaps points to the NYSE program that has opened the portfolio of service providers to independent third parties competing with one another. That ‘breeds innovation… I think NASDAQ should do the same,’ he states.
Revised rules
Under the revised rules, effective immediately, newly listed IPOs, spin-offs, companies emerging from bankruptcy and companies switching from the NYSE will be eligible for a variety of new IR services for a limited period of time.
Companies with market caps below $500 mn will be offered services worth $93,000 annually for two years, including an IR website, press release distribution, an IR desktop platform and governance tools.
Large-cap companies will receive all those services (with expanded press release volume), as well as market surveillance services worth $75,000, for four years.
Strong criticism
As with the NYSE move, the NASDAQ proposal has drawn fire from IR service providers, with Business Wire and PR Newswire submitting written comments challenging the proposal on a variety of fronts.
One of the most serious charges is that NASDAQ’s bundling of IR services with its listing service is an apparent violation of federal antitrust law.
A second significant complaint alleges that delivering IR services through a NASDAQ subsidiary rather than independent third parties (like the NYSE does) creates potential conflicts of interest, in particular related to NASDAQ-imposed disclosure requirements.
NASDAQ’s response to the anti-competitive charge is to note that companies are free to use other vendors if they choose.
Countering the conflict-of-interest claim, NASDAQ points out that it has separated its self-regulatory organization functions from its listing and service delivery subsidiaries.
It also points out that the SEC would have to approve any easing or tightening in disclosure requirements the exchange might seek to implement.
In its written ruling, the SEC says it believes ‘NASDAQ’s proposal reflects the current competitive environment for exchange listings among national securities exchanges, and is appropriate and consistent with’ laws governing securities exchanges.
NASDAQ told the SEC that only 44 companies in 2009, 80 companies in 2010 and 62 companies through June 30, 2011 would have qualified for free services under the new rules, representing approximately 3 percent of listed companies.
Read the full SEC ruling.
