In November 2023, Nasdaq added a new FAQ providing guidance on completing the electronic disclosure form to provide the required advance notice to Nasdaq’s MarketWatch Department when material non-public information is being announced, including news releases. I realized that while I have blogged about the Nasdaq notification requirements in general (see HERE), the recent changes to the Nasdaq reverse split rules, including MarketWatch notification (see HERE) and Nasdaq continued listing requirements (see HERE), I have not yet drilled down on the Nasdaq Rule 5250(b)(1) MarketWatch disclosure requirements, until now.
As an aside, Nasdaq Rule 5250 is a lengthy rule covering multiple facets of listed company obligations (including the reverse split and notification requirements and several of the corporate governance requirements in the blogs linked to above). This blog focuses on Rule 5250(b)(1) and its related IM discussions related to the disclosure of material non-public information.
Nasdaq Rule 5250(b)(1)
Nasdaq Rule 5250(b)(1) sets forth a listed company’s obligation to make public disclosure of material information. In particular, the Rule provides:
Except in unusual circumstances, a Nasdaq-listed Company shall make prompt disclosure to the public through any Regulation FD compliant method (or combination of methods) of disclosure of any material information that would reasonably be expected to affect the value of its securities or influence investors’ decisions. The Company shall, prior to the release of the information, provide notice of such disclosure to Nasdaq’s MarketWatch Department at least ten minutes prior to public announcement if the information involves any of the events set forth in IM-5250-1 and the public release of the material information is made between 7:00 a.m. to 8:00 p.m ET. If the public release of the material information is made outside the hours of 7:00 a.m. to 8:00 p.m ET, Nasdaq Companies must notify MarketWatch of the material information prior to 6:50 a.m. ET. As described in IM-5250-1, prior notice to the MarketWatch Department must be made through the electronic disclosure submission system available at www.nasdaq.net, except in emergency situations, when notification may instead be provided by telephone or facsimile. For disclosure and notification requirements related to reverse stock splits, please refer to subparagraph (4) below and Rule 5250(e)(7).
For a refresher on Regulation FD, including compliant methods of disclosure, see HERE.
IM-5250-1 drills down further on the basic Rule quoted above. IM-5250-1 first reiterates the rules itself but notes that in unusual circumstances a company may not be required to make public disclosure of material events; for example, where it is possible to maintain confidentiality of those events and immediate public disclosure would prejudice the ability of the company to pursue its legitimate corporate objectives.
However, whenever there is unusual trading activity in a company’s securities, the company has an obligation to determine whether there is material information or news which should be disclosed. If rumors or unusual market activity indicate that information on impending developments has become known to the investing public, or if information from a source other than the Company becomes known to the investing public, a clear public announcement may be required as to the state of negotiations or development of Company plans. The “cleansing” of material non-public information is required regardless of whether there is otherwise an event ripe for reporting under the SEC rules. Likewise, a company should address false or inaccurate rumors that are having, or are likely to have, an effect on trading.
Nasdaq MarketWatch monitors the trading of securities in real-time and may contact a company where there is unusual trading activity to work together to determine if material non-public information has become known to the investment community requiring a cleansing disclosure. Any information shared with Nasdaq is kept confidential and can only be used for regulatory purposes. Furthermore, depending on the materiality of the information and the anticipated affect of the information on the price of the Company’s securities, the MarketWatch Department may advise the Company that a temporary trading halt is appropriate to allow for full dissemination of the information. Such a trading halt is generally no more than 30 minutes.
IM-5250-1 contains a non-exclusive list of material events that would require the 10-minute advance MarketWatch notice. In particular:
- Financial related disclosures, including quarterly and annual earnings, earnings restatements, and guidance;
- Corporate reorganizations and acquisitions, including mergers, tender offers, asset transactions, bankruptcies and receiverships;
- New products or discoveries, or developments regarding customers or suppliers (for example significant developments in clinical or customer trials, or receipt or cancellation of a material contract or order);
- Senior management changes or a change of control;
- Resignation or termination of independent auditors, or withdrawal of a previously issued audit report;
- Events regarding the company’s securities such as defaults on senior securities, calls for redemption, repurchase plans, stock splits, dividends, changes to the rights of security holders, or public or private sales of additional securities;
- Significant legal or regulatory developments; and
- Any event requiring a Form 8-K.
The repeated failure to comply with the notice rules can lead to a public reprimand, or in extreme circumstances, a delisting determination.
Nasdaq FAQ
Notice to MarketWatch must be made through the electronic disclosure submission system. When completing the notice Nasdaq requires disclosures be assigned to one or more news categories. Nasdaq has published an FAQ with an example list of notice categories for assistance when making the filing. In particular:
The Electronic Disclosure portal requires disclosures be assigned to one or more news categories. We are providing the following examples to assist Nasdaq-listed companies with selecting categories for their submitted announcements.
Bankruptcy/Liquidations
- Chapter 7 bankruptcy liquidation
- Chapter 11 bankruptcy reorganization
- Announcement of reorganizations equivalent or similar to the above by non-US companies
- SPAC liquidation
Conference Calls/Webcasts/Events
- Scheduling notices for future calls (earnings, investor, conference calls)
- Investor presentations
- Attendance at industry conferences
Cybersecurity Incidents
- Any item being disclosed under Item 1.05 on Form 8-K related to a cybersecurity incident deemed material
- Comparable disclosures to the above by a foreign private issuer on Form 6-K
Dividends (Cash or Stock)
- Regular or special cash dividends
- Stock dividends involving a distribution of the listed security or other securities
Earnings/Quarterly or Annual Reports
- Operating or financial results that have not been previously disclosed
- Production figures or other metrics significant to analysts or investors
- Non-reliance on previously issued financial results
Equity or Debt Financings
- Any financing transaction involving the issuance of debt, equity (or both)
FDA-Related/Clinical Trials/Study Results
- Events involving the FDA (or non-US equivalent) including any communications or decisions
- Investor presentations involving clinical or study results
- Clinical trial results/updates
- Events involving milestone payments, material collaborations and/or partnerships
Listing Deficiency or Compliance Notices
- Non-compliance with Nasdaq’s listing requirements
- Regaining compliance with Nasdaq’s listing requirements
- Receipt of a Staff Determination Letter (delisting, reprimand)
- Requests for Hearings to appeal Staff Determination Letters
- Delisting due to non-compliance with the Listing Rules
M&A
- Announcements related to mergers and acquisitions
- Acquisition or sale of significant business lines
New Products or Partnership Agreements
- New product or product line announcements
- Announcements relating to new joint ventures, joint licensing agreements, joint market agreements
Officer/Director (Appointments or Resignations)
- Corporate officer hires/terminations/resignations
- Board of Directors additions, resignations or departures
- New board committee assignments for new or existing directors
Stock Splits (Forward or Reverse)
- Reverse splits effected to regain compliance with minimum bid price requirements
- Ratio changes for Nasdaq-listed depository receipts (e.g., ADRs)
- Forward stock splits, including forward splits structured as stock dividends
Other
- Any disclosure that does not fit within the other categories
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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