Deals & Deal Makers: Nasdaq 100 Index to Scrutinize Accuracy of Listed Firms' Figures
NEW YORK -- Companies recently had to start swearing to the accuracy of their financial statements to keep regulators happy. Now, the owners of stock indexes might kick out companies that don't do so.</br></br>At least that is how it will work for the Nasdaq Stock Market's Nasdaq 100 index, a closely followed barometer of the market's large nonfinancial stocks -- an index that was the star of the tech-stock boom of the 1990s. Investors have about $30 billion linked to the Nasdaq 100 index, mostly through shares of the Nasdaq-100 Index Tracking Stock, an exchange-traded fund.</br></br>The yearly rebalancing of the Nasdaq 100 index is under way, and the index's members and candidates that can't attest to the honesty of their financial figures won't be allowed aboard.</br></br>The move -- whether more for symbolism or substance -- is the first of its kind among overseers of major indexes, with the Nasdaq's rule saying it will "prohibit securities from being included if the annual financial statements of the issuer of the securities cannot currently be relied upon."</br></br>Officials of Nasdaq, a unit of the National Association of Securities Dealers, said they plan to police the requirement by monitoring companies' financial filings, keeping tabs on corporate news releases and by following comments made by company executives. It is understood that the market won't require the companies to file special affidavits with Nasdaq.