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NASDAQ Listing Requirements

NASDAQ Amends Rules For Waivers To Code Of Conduct

On September 5, 2023, Nasdaq adopted amendments to Listing Rule 5610 and IM-5610 requiring listed companies to maintain a code of conduct and to disclose certain waivers.  This is also a good time to discuss the code of conduct/code of ethics requirements applicable to all companies subject to the Securities Exchange Act of 1934 (“Exchange Act”) reporting requirements.

Code of Conduct/Code of Ethics

Section 406(c) of the Sarbanes-Oxley Act of 2002 (“SOX”) requires all companies that are subject to the Exchange Act reporting requirements to disclose whether they have adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.  If the company has not adopted such a code, it must explain why it has not done so.

SOX defines a code of ethics as written standards reasonably designed to deter wrongdoing and to promote: (i) honest and ethical conduct including related to conflicts of

Nasdaq Listing Deficiencies And Delisting – Part 3

As 2022 and 2023 have continued to be extremely tough years for the capital markets many small cap companies find themselves failing to maintain the minimum continued listing requirements.  I’ve recently written about those continued listing requirements, see HERE, and Nasdaq’s proposed rule changes for reverse split notifications as companies struggle to maintain the $1.00 minimum bid price requirement, see HERE.

These blogs provide a perfect segue for a deep dive into the Nasdaq deficiency notice and delisting process.  In this first blog in the series, I provided an overview of deficiencies, deficiency notices, cure periods and compliance plans – see HERE.  In Part 2, I reviewed the hearing panel process – see HERE.  In this Part 3, I will review the appeals to the Nasdaq Listing and Hearing Review Council and delisting.  I note that the Nasdaq rules also contain administrative rules regarding the conduct of adjudicators and advisors and the adjudication process, which

Nasdaq Listing Deficiencies And Delisting– Part 2

As 2022 and 2023 have continued to be extremely tough years for the capital markets many small cap companies find themselves failing to maintain the minimum continued listing requirements.  I’ve recently written about those continued listing requirements, see HERE, and Nasdaq’s proposed rule changes for reverse split notifications as companies struggle to maintain the $1.00 minimum bid price requirement, see HERE.

These blogs provide a perfect segue for a deep dive into the Nasdaq deficiency notice and delisting process.  In this first blog in the series, I provided an overview of deficiencies, deficiency notices, cure periods and compliance plans – see HERE.  In this Part 2, I will review the hearing panel process followed by appeals and ultimately delisting.

Review of Deficiency Determinations by Hearing Panel

As noted in Part 1 of this series, Nasdaq deficiency notifications are one of four types:

  • Staff delisting determinations, which are notifications of deficiencies that, unless appealed, subject the Company to
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Nasdaq Listing Deficiencies And Delisting – Part 1

As 2022 and 2023 have continued to be extremely tough years for the capital markets, many small-cap companies find themselves failing to maintain the minimum continued listing requirements.  I’ve recently written about those continued listing requirements – see HERE – and Nasdaq’s proposed rule changes for reverse split notifications as companies struggle to maintain the $1.00 minimum bid price requirement – see HERE.

These blogs provide a perfect segue for a deep dive into the Nasdaq deficiency notice and delisting process.  In this first blog in the series, I provide an overview of deficiencies, deficiency notices, cure periods and compliance plans.  In the Part 2, I will review the hearing panel process followed by appeals and ultimately delisting.

Overview – Deficiency Notices

When the Nasdaq Listing Qualifications Department determines that a company does not meet a listing standard, it will immediately notify the company of the deficiency.  The notification will come in letter format, literally within a day

NASDAQ Continued Listing Requirements

Although I often write about initial listing standards, I realized that I have not yet blogged about the reduced ongoing listing standards for national exchanges.  In this blog, I will cover the continued listing requirements for Nasdaq listed companies and in next week’s blog I will cover the NYSE/NYSE MKT. For a review of initial listing requirements for the Nasdaq Capital Markets and NYSE MKT see HERE.

Nasdaq Capital Markets

To continue listing on Nasdaq Capital Markets, a company is required to meet certain ongoing quantitative and qualitative requirements.  NASDAQ also requires listed companies to meet stringent corporate governance standards.

In order to continue listing on Nasdaq Capital Markets a company must meet all of the following requirements: (i) at least 2 market makers; (ii) a $1 minimum bid price; (iii) at least 300 unrestricted round lot public shareholders; (iv) at least 500,000 publicly held shares; and (v) a market value of publicly held shares of at least $1

Compliance Deadlines For Nasdaq Board Diversity Rules

On August 6, 2021, the SEC approved Nasdaq’s board diversity listing standards proposal.  Nasdaq Rule 5605(f) requires Nasdaq listed companies, subject to certain exceptions, to: (i) to have at least one director who self-identifies as a female, and (ii) have at least one director who self-identifies as Black or African American, Hispanic or Latino, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, two or more races or ethnicities, or as LGBTQ+, or (iii) explain why the company does not have at least two directors on its board who self-identify in the categories listed above.  The rule changes also made headlines in most major publications.  One of the most common themes in the press was the lack of inclusion of people with disabilities in the definition of an “underrepresented minority” for purposes of complying with the new rules.

The original rules had tiered compliance deadlines which Nasdaq (and practitioners) found confusing and unnecessarily complicated.  On December 14,

Cannabis Trade Association Makes Plea For National Exchange Listings

The American Trade Association for Cannabis and Hemp (ATACH) has published a policy paper urging the Nasdaq and New York Stock Exchange to allow U.S. cannabis operators that “touch the plant” to list on their respective Exchanges.  The current prohibition to listing is purely discretionary and not because of any regulatory action by the SEC or any other U.S. regulatory authority.  The policy paper, published November 7, 2022, outlines very convincing arguments for allowing U.S. operators to list on the National Exchanges.

The policy paper notes that up until now, the National Exchanges have refused to list these companies while cannabis remains federally illegal out of concerns that they could be charged with aiding and abetting violations of the U.S. Controlled Substances Act (“CSA”) or with money laundering by the receipt of listing fees.  As of the time of the publication of the policy paper, cannabis is legal in 37 states, D.C. and U.S. territories.  The ATACH rightfully asserts that

Update On Nasdaq And NYSE Direct Listings

The rules related to direct listings continue to evolve as this method of going public continues to gain in popularity.  The last time I wrote about direct listings was in September 2020, shortly after the SEC approved, then stayed its approval, of the NYSE’s direct listing rules that allow companies to sell newly issued primary shares on its own behalf into the opening trade in a direct listing process (see HERE). Since that time, both the NYSE and Nasdaq proposed rules to allow for a direct listing with a capital raise have been approved by the SEC.

The Nasdaq Stock Market  has three tiers of listed companies: (1) The Nasdaq Global Select Market, (2) The Nasdaq Global Market, and (3) The Nasdaq Capital Market.  Each tier has increasingly higher listing standards, with the Nasdaq Global Select Market having the highest initial listing standards and the Nasdaq Capital Markets being the entry-level tier for most micro- and small-cap issuers. 

Nasdaq Updated LAS Form

Effective September 17, 2021, Nasdaq updated its Listing of Additional Shares (LAS) Form and the process for the review of such forms.

Background

Nasdaq Rule 5250 sets forth certain obligations for companies listed on Nasdaq including related to requirements to provide certain information and notifications to Nasdaq, make public disclosures, file periodic reports with the SEC, and distribution of annual and interim reports.  Rule 5250(e) specifies the triggering events that require a listed company to submit certain forms to Nasdaq.

Rule 5250(e) requires the submittal of specific forms related to the following triggering events:

  • Change in Number of Shares Outstanding – Each listed company must file a form with Nasdaq no later than 10 days after the occurrence of any aggregate increase or decrease of any class of securities listed on Nasdaq that exceeds 5% of the amount of securities outstanding of that class.
  • Listing of Additional Shares – As further detailed below, a listed company must give
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Public Market Listing Standards

One of the bankers that I work with often once asked me if I had written a blog with a side-by-side comparison of listing on Nasdaq vs. the OTC Markets and I realized I had not, so it went on the list and with the implementation of the new 15c2-11 rules, now seems a very good time to tackle the project.  I’ve added NYSE American to the list as well.

Quantitative and Liquidity Listing Standards

Nasdaq Capital Markets

To list its securities on Nasdaq Capital Markets, a company is required to meet: (a) certain initial quantitative and qualitative requirements and (b) certain continuing quantitative and qualitative requirements.  The quantitative listing thresholds for initial listing are generally higher than for continued listing, thus helping to ensure that companies have reached a sufficient level of maturity prior to listing.  NASDAQ also requires listed companies to meet stringent corporate governance standards.

Requirements Equity Standard  Market Value of

Listed Securities

Standard

Net
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