On September 3, 2025, Nasdaq proposed to adopt additional listing criteria for companies primarily operating in China, including Hong Kong and Macau.
Background
Over the years U.S. capital markets regulators, including the SEC and Nasdaq, have been vocal about the risks in investing in China based companies due to poor disclosures and disclosure controls. In December 2020 the Holding Foreign Companies Accountable Act (“HFCA”) was adopted requiring foreign-owned issuers to certify that the PCAOB has been able to audit specified reports and inspect their audit firm within the last three years. If the PCAOB is unable to inspect the company’s public accounting firm for three consecutive years, the company’s securities are banned from trading on a national exchange. For my three part blog on the HFCA see HERE; HERE and HERE.
Despite the HFCA, the SEC has remained concerned about the quality of disclosures, including specific risks, involved with China based companies. Back in July 2023, the SEC published a sample comment letter designed to inform the markets as to the type of information China based companies should include in their registration statement and periodic reports – see HERE. Even before that, in late 2022, the trading associated with China based companies effectively shut down the Nasdaq small cap IPO market for a time period – see HERE.
None of this has slowed down the China based IPO market. In fact, since 2020, there has been a sharp increase in the number of companies from China seeking to list in the U.S. with a record number seeking listing in 2024 and a continuation of that pace in 2025. Regulators continue to be concerned about the risks to investors and national security associated with China based companies seeking access to U.S. equity markets. For example, in May 2025, the financial officers of 23 states wrote a letter to SEC Chairman Atkins highlighting concerns with the listing of Chinese companies.
Nasdaq has its own concerns with the trading of companies headquartered in or whose business is principally administered in China. For example, although China based companies only account for less than 10% of Nasdaq listed companies, nearly 70% of matters that Nasdaq refers to the SEC or Finra are related to these China based entities.
Nasdaq believes a big problem point is a lack of liquidity in the securities of these companies. When a Chinese company lists on Nasdaq through an initial public offering (“IPO”) or business combination with a small offering size or a low public float percentage, the company may not attract market attention nor develop sufficient public float, investor base, and trading interest to provide the depth and liquidity necessary to promote fair and orderly trading. Specifically, Nasdaq states “[A]s a result, the securities may trade infrequently, in a more volatile manner and with a wider bid-ask spread, all of which may result in trading at a price that may not reflect their true market value and make the security more susceptible to manipulation by bad actors. The risk to investors in such cases may be compounded because regulatory investigations into price manipulation, insider trading and compliance concerns may be impeded, and investor protections and remedies may be limited in such cases, due to obstacles encountered by U.S. authorities in bringing or enforcing actions against entities and individuals involved in potentially manipulative trading activities and, if applicable, the companies and insiders.”
Rule Proposal
IPOs
Nasdaq is proposing to require that to complete an IPO, a Chinese based company must offer a minimum of $25 million in securities in a firm commitment public offering in the United States. Nasdaq also proposes to adopt comparable changes for companies seeking to list in connection with de-SPAC transactions, direct listings, and that are currently trading on the OTC market or another national securities exchange.
To implement the rule change, Nasdaq is proposing new Rule 5210(1) which would apply to a company that is headquartered or incorporated in China (including Hong Kong and Macau) or whose business is principally administered in one of those jurisdictions. A company’s business will be considered to be principally administered in a jurisdiction if: (i) the company’s books and records are located in that jurisdiction; (ii) at least 50% of the company’s assets are located in such jurisdiction; (iii) at least 50% of the company’s revenues are derived from such jurisdiction; (iv) at least 50% of the Company’s directors are citizens of, or reside in, such jurisdiction; (v) at least 50% of the Company’s officers are citizens of, or reside in, such jurisdiction; (vi) at least 50% of the Company’s employees are based in such jurisdiction; or (vii) the Company is controlled by, or under common control with, one or more persons or entities that are citizens of, reside in, or whose business is headquartered, incorporated, or principally administered in such jurisdiction.
Rule 5210(1) will require a Chinese company to offer a minimum amount of securities in a Firm Commitment Offering in the United States to Public Holders that will result in gross proceeds to the company of at least $25 million. Public Holders will not include any officer, directors, or 10%+ shareholders.
Although not specifically written into the proposed rule, the release itself also makes it clear that Nasdaq will also consider the level of participation by Chinese investors and retention of significant ownership by insiders.
Business Combinations
Nasdaq has the same concerns when a Chinese company seeks to go public through a business combination. Since business combinations may not involve an offering, Nasdaq is proposed to adopt new Rule 5210(1)(ii) which require a company to have a minimum Market Value of Unrestricted Publicly Held Shares following the business combination equal to at least $25 million.
Direct Listings
Nasdaq is proposing new rule 5210(1)(iii) which would require requires a Chinese company to meet all applicable listing requirements for the Nasdaq Global Select Market (NGS) and the additional requirements of IM-5315-1, or the applicable listing requirements for the Nasdaq Global Market (NGM) and the additional requirements of IM-5405-1. Moreover, the new rules would prohibit a China based company from listing on the Nasdaq Capital Markets in connection with a direct listing.
Uplisting from OTC and Transfer from NYSE
Nasdaq believes that a Chinese company initially listing on the OTC market or another national securities exchange, and then quickly transferring its listing to Nasdaq may present similar risks to U.S. investors as IPOs of Chinese companies. Therefore, Nasdaq is proposing new rule 5210(1)(iv) which would require a Chinese company that transfers its listing from the OTC Market or from another national securities exchange to first trade on that other market for at least one year before it is eligible to list on Nasdaq. In addition, Nasdaq will require that these companies have a minimum Market Value of Unrestricted Publicly Held Shares of at least $25 million.
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.
Contact Anthony, Linder & Cacomanolis, PLLC. Inquiries of a technical nature are always encouraged.
Follow Anthony, Linder & Cacomanolis, PLLC on Facebook, LinkedIn, YouTube, Pinterest and Twitter.
Anthony, Linder & Cacomanolis, PLLC makes this general information available for educational purposes only. The information is general in nature and does not constitute legal advice. Furthermore, the use of this information, and the sending or receipt of this information, does not create or constitute an attorney-client relationship between us. Therefore, your communication with us via this information in any form will not be considered as privileged or confidential.
© Anthony, Linder & Cacomanolis, PLLC
