On December 12, 2025, Nasdaq filed a proposal with the SEC to provide it with discretionary authority to refuse to deny initial listing applications, even where the applicant meets all stated listing requirements. This is yet another recent move by Nasdaq to prevent the listing, and continued listing, of low market cap companies in general; and Asian based foreign private issuers (FPIs) in particular, thought to be engaging in routine stock manipulation.
Although the publication is referred to as a “proposal,” it is effective immediately and applies to all companies currently in the application process.
Other recent Nasdaq initiatives include: (i) amendments to increase minimum listing standards for China based companies (see HERE) ; (ii) amendments to accelerate the suspension and delisting of a company that falls below any of the numeric listing requirements, including the bid price, market value of public float, equity, income and total assets/revenue requirements, and that has a Market Value of Listed Securities (“MVLS”) below $5 million (see HERE); (iii) amendments to its liquidity listing standards for the Nasdaq Capital Market and Nasdaq Global Market to increase the minimum Market Value of Unrestricted Publicly Held Shares (“MVUPHS”) requirement for those companies listing under the net income standard from $5 million to $15 million (see HERE; (iv) amendments to accelerate the delisting of $0.10 stocks (see HERE); (v) amendments requiring that MVUPHS can only be satisfied through IPO proceeds and that shares registered for resale may no longer be counted (see HERE); (vi) a amendments accelerating the de-listing process for companies that fail to regain compliance with the minimum bid price requirements following a second compliance period and for securities that have had a reverse stock split over the prior one-year period (see HERE); and (vii) rule changes tightening up the ability to use a reverse split to meet the minimum price where such split would result in non-compliance with other Nasdaq listing standards such as the minimum number of round lot holders or public float requirements (see HERE).
Proposal to Authorize Discretionary Authority to Refuse Listings
Nasdaq Listing Rule 5101
Over the past couple of months, the SEC has suspended the trading in eleven (11) separate companies based upon potential manipulation in the securities through recommendations made to investors by unknown persons via social media to purchase, hold, and/or sell the securities. That is, the manipulation appears to be orchestrated by unknown third parties; neither the companies nor persons associated with the companies have been charged in connection with the schemes. In almost every case the effected company had been public for less than a year. All of the companies primarily operate in Asia including Singapore (3); Shangai (1); Hong Kong; (4); Malaysia (1); Indonesia (1); and Japan (1).
Nasdaq Listing Rule 5101 is a general preamble to the numerous specific listing rules and grants Nasdaq broad discretionary authority over the initial and continued listing of securities in Nasdaq in order to maintain the quality of and public confidence in its market, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to protect investors and the public interest. Rule 5101 specifically states that, “[N]asdaq may use such discretion to deny initial listing, apply additional or more stringent criteria for the initial or continued listing of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes initial or continued listing of the securities on Nasdaq inadvisable or unwarranted in the opinion of Nasdaq, even though the securities meet all enumerated criteria for initial or continued listing on Nasdaq.”
IM-5101-1 continues with a non-exclusive description of the circumstances under with the Rule may be invoked. Overall, IM-5101-1 sets forth four main circumstances for use of the rule: (i) when an individual with a history of regulatory misconduct is associated with the company; (ii) when a company files for protection under the federal bankruptcy laws or comparable foreign laws; (iii) when a company’s independent accountants issue a disclaimer opinion on financial statements required to be audited, or when financial statements do not contain a required certification; or (iv) when the company has a history of corporate governance violations.
Particular, Nasdaq Rule 5101 and its interpretative IM-5101-1 are based on the characteristics of the company itself and its associated persons. Nasdaq Rule 5101 does not allow denial of a listing based on the potential for one or more unaffiliated third parties to engage in misconduct impacting a company’s securities. In fact, the SEC could set aside a denial of listing that goes beyond the scope of the listing rules.
Nasdaq is now seeking the authority to deny a listing based on outside third party factors including: (i) the potential for one or more third parties to engage in misconduct impacting a company’s securities; (ii) the trading patterns of other companies with similar characteristics; (iii) advisors associated with companies (including auditors, underwriters, law firms, brokers, clearing firms, or other professional service providers); and (iv) the impact of foreign laws on the potential recourse available to U.S. regulators or investors in the event of misconduct.
To effectuate the proposal, Nasdaq is proposing to adopt IM-5101-3 providing Nasdaq with authority under Rule 5101 to deny initial listing based on factors that could make the listed security susceptible to manipulation related to concerns Nasdaq and other regulators have identified with previously listed companies that are similarly situated to the company or based on considerations related to the company’s advisors (including auditors, underwriters, law firms, brokers, clearing firms, or other professional service providers), even where the applicant meets all stated listing requirements.
New IM-5103-3 would include a non-exclusive list of factors that Nasdaq may consider in connection with listing applications, including:
- where the company is located, including the availability of legal remedies to U.S. shareholders in that jurisdiction, the existence of blocking statutes, data privacy laws and other laws in foreign jurisdictions that may present challenges to regulators seeking to enforce rules against the company, the ability of parties to conduct comprehensive due diligence in that jurisdiction, and the transparency of regulators in the jurisdiction;
- whether a person or entity exercises substantial influence over the company and, if so, where that person or entity is located, including the availability of legal remedies to U.S. shareholders in that jurisdiction, and all other factors listed in (i) above regarding foreign jurisdictions;
- whether the expected public float and dissemination of the share distribution, based on a review of underwriter, broker and clearing allocations and consideration of prior deals involving those service providers, at the time of the IPO and post offering, raises concerns about adequate liquidity and potential concentration;
- whether there are issues concerning the company’s advisors (including auditors, underwriters, law firms, brokers, clearing firms, or other professional service providers), based on factors including, but not limited to, whether the advisor has been reviewed by applicable regulators and, if so, what were the results of those reviews;
- if the company’s advisor is a new entity, whether the advisor’s principals were involved with other firms with a regulatory history;
- whether any of the company’s advisors were involved in prior transactions where the securities became subject to a pattern of concerning or volatile trading;
- whether the company’s management and Board has experience or familiarity with U.S. public company requirements, including regulatory and reporting requirements under Nasdaq rules and federal securities laws;
- whether there are any FINRA, SEC or other regulatory referrals related to the company or its advisors, which can be included in the record of the matter and, if applicable, the results of those referrals;
- whether the company currently has, or recently has had, a going concern audit opinion and, if so, what is the Company’s plan to continue as a going concern; and
- whether there are other factors that raise concerns about the integrity of the Company’s board, management, significant shareholders, or advisors.
The rule has reputational teeth. When Nasdaq relies on Rule 5101 to deny listing a company must make a public announcement in a press release or other Regulation FD compliant manner about the receipt of the determination and basis therefore, within four days.
Although the proposed new rule does not directly state so, clearly it is aimed at China/Asia based companies.
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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