The SEC has approved the request of the Nasdaq Stock Market, Inc. that securities of companies listed on the Nasdaq Capital Market (formerly the Nasdaq SmallCap Market) be considered "covered securities" for purposes of Section 18 of the Securities Act. "Covered securities" are exempt from state pre-sale qualification under the National Securities Market Improvement Act of 1996 (NSMIA). The change will be reflected in an amendment to Rule 146(b)(1), and will be effective on May 18, 2007.

The “covered security” designation means that the state securities, or “blue sky,” laws will not apply to offerings by companies listed on the Nasdaq Capital Market, including underwritten public offerings, PIPEs, registered direct transactions and rights offerings. Further, Nasdaq Global Market (formerly Nasdaq National Market) companies will no longer face the loss of the “covered security” designation (and the preemption of the blue sky laws) if they transfer to the Nasdaq Capital Market. Although many states had a self-executing exemption for Nasdaq Capital Market-listed companies, other states, most notably New York and California, did not.

Nasdaq originally proposed this change in March 2006. The SEC delayed approving the change until Nasdaq proposed changes to its Capital Market listing standards to make them substantially similar with those of the American Stock Exchange. Those proposed changes have also been approved, and are set forth in the attached release.

Click the following link to read the SEC press release: http://www.sec.gov/rules/final.shtml

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