NASDAQ Listing Requirements

China Based Companies Continue To Face US Capital Market Scrutiny

On March 24, 2021, the SEC adopted interim final amendments to implement the congressionally mandated submission and disclosure requirements of the Holding Foreign Companies Accountable Act (HFCA Act). Following adoption of the HFCA, on July 30, 2021, SEC Chairman Gary Gensler issued a statement warning of risks associated with investing in companies based in China. Although the statement has a different angle, it joins the core continued concerns of the SEC top brass and Nasdaq expressed over the years.

In June 2020 Nasdaq published proposed rules which would make it more difficult for a company to list or continue to list based on the quality of its audit, which could have a direct effect on companies based in China (see HERE). In September 2020, the SEC instituted proceedings as to whether to approve or deny the proposed rule change. As of the date of this blog, the proposal has not been ruled upon by the SEC.

However, the

August 31, 2021

SPAC Nasdaq Listing Standards

I’ve written quite a bit about SPAC’s recently, but the last time I wrote about SPAC Nasdaq listing requirements, or any attempted changes thereto, was back in 2018 (see HERE). Since that time, Nasdaq has a win and recently a loss in its ongoing efforts to attract SPAC listings.

Background on SPACs

Without reiterating my lengthy blogs on SPACs and SPAC structures (see, for example, HERE and HERE), a special purpose acquisition company (SPAC) is a blank check company formed for the purpose of effecting a merger, share exchange, asset acquisition, or other business combination transaction with an unidentified target. Generally, SPACs are formed by sponsors who believe that their experience and reputation will facilitate a successful business combination and public company.

The provisions of Rule 419 apply to every registration statement filed under the Securities Act of 1933, as amended, by a blank check company that is issuing securities which fall within the definition of

August 10, 2021

Nasdaq Board Diversity Proposal

Nasdaq has long been a proponent of environmental, social and governance (ESG) disclosures and initiatives, having published a guide for listed companies on the subject over six years ago (see HERE). In December 2020, Nasdaq took it a step further and proposed a rule which would require listed companies to have at least one woman on their boards, in addition to a director who is a racial minority or one who self-identifies as lesbian, gay, bisexual, transgender or queer. Companies that don’t meet the standard would be required to justify their decision to remain listed on Nasdaq. To help facilitate the proposed rule, Nasdaq has also proposed to offer a complimentary board recruiting solution. A final decision on the proposals is expected this summer.

The SEC recently extended the consideration period and will either approve or disapprove the proposal by August 8, 2021. The newest Regulatory Flex Agenda which was published last week and will be a topic

July 13, 2021

SPAC Transactions Continue Amid SEC Cautionary Statements

Since I wrote about the SPAC IPO boom in June 2020 (HERE), the trend has not waned. However, as soon as celebrities like Jay-Z, Shaquille O’Neal, A-Rod and astronaut Scott Kelly jumped in, I knew the tide was shifting, and recent SEC alerts bring that to light. To be clear, SPACs have been used as a method for going public for years and will continue to do so in the future. In fact, I firmly believe that going public through a SPAC will continue and should continue to rival the traditional IPO. With so much SPAC money available in the market right now (an estimated $88 billion raised in 2021 so far already exceeding the estimated $83.4 billion raised in all of 2020) and the Dow and S&P beating historical records, SPACs are an excellent option as an IPO alternative.

However, SPACs should not be viewed as the trendy investment of the day and both investors and

April 13, 2021

ESG Disclosures – A Continued Discussion

In a series of blogs, I have been discussing the barrage of environmental, social and governance (ESG) related activity and focus by capital markets regulators and participants. Former SEC Chair Jay Clayton did not support overarching ESG disclosure requirements. However, new acting SEC Chair Allison Herron Lee has made a dramatic change in SEC policy, appointing a senior policy advisor for climate and ESG; the SEC Division of Corporation Finance (“Corp Fin”) announced it will scrutinize climate change disclosures; the SEC has formed an enforcement task force focused on climate and ESG issues; the Division of Examinations’ 2021 examination priorities included an introduction about how this year’s priorities have an “enhanced focus” on climate and ESG-related risks; almost every fund and major institutional investor has published statements on ESG initiatives; a Chief Sustainability Officer is a common c-suite position; independent auditors are being retained to attest on ESG disclosures; and enhanced ESG disclosure regulations are most assuredly forthcoming.

April 6, 2021

NYSE Continues To Struggle With Direct Listing Rule Changes

Late last year, around the same time that the SEC approved Nasdaq rule changes related to direct listings on the Nasdaq Global Market and Nasdaq Capital Market (see HERE), the SEC rejected proposed amendments by the NYSE big board which would allow a company to issue new shares and directly raise capital in conjunction with a direct listing process. Nasdaq had previously updated its direct listing rules for listing on the Market Global Select Market (see HERE).

The NYSE did not give up and in August of this year, after two more proposed amendments, the SEC finally approved new NYSE 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. However, after receiving a notice of intent to petition to prevent the rule change, the SEC has stayed the approval until further notice. Still pushing forward, on September 4, the NYSE filed

September 15, 2020

Nasdaq Rule Amendments 2020

In addition to the temporary rule changes and relief that Nasdaq has provided this year for companies affected by Covid-19 (see HERE and HERE), the exchange has enacted various rule amendments with varying degrees of impact and materiality.

In particular, over the last year Nasdaq has amended its delisting process for low-priced securities, updated its definition of a family member for the purpose of determining director independence and has clarified the term “closing price” for purposes of the 20% rule. This blog discusses each of these amendments.

Delisting Process

In April 2020, the SEC approved Nasdaq rule changes to the delisting process for certain securities that fall below the minimum price for continued listing. The rule change modifies the delisting process for securities with a bid price at or below $0.10 for ten consecutive trading days during any bid-price compliance period and for securities that have had one or more reverse stock splits with a cumulative ratio of

September 1, 2020

Nasdaq Proposed Rule Changes To Its Discretionary Listing And Continued Listing Standards

On April 21, 2020, the SEC Chairman Jay Clayton and a group of senior SEC and PCAOB officials issued a joint statement warning about the risks of investing in emerging markets, especially China, including companies from those markets that are accessing the U.S. capital markets (see HERE). Previously, in December 2018, Chair Clayton, SEC Chief Accountant Wes Bricker and PCAOB Chairman William D. Duhnke III issued a similar cautionary statement, also focusing on China (see HERE).

Following the public statements, in June 2020, Nasdaq issued new proposed rules which would make it more difficult for a company to list or continue to list based on the quality of its audit, which could have a direct effect on companies based in China.

Nasdaq Proposed Rule Changes

On June 2, 2020, the Nasdaq Stock Market filed a proposed rule change to amend IM-5101-1, the rule which allows Nasdaq to use its discretionary authority to deny listing or continued listing

August 4, 2020

NASDAQ Provides Additional Relief To Shareholder Approval Requirements For Companies Affected By Covid-19

Nasdaq has provided additional relief to listed companies through temporary rule 5636T easing shareholder approval requirements for the issuance of shares in a capital raise. The rule was effective May 4, 2020 and will continue through and including June 30, 2020. The purpose of the rule change is to give listed companies affected by Covid-19 quicker access to much-needed capital.

Temporary Rule 5636T is limited to the transactions and shareholder approval requirements specifically stated in the rule. If shareholder approval is required based on another rule, such as a change of control, or another Nasdaq rule is implicated, those other rules will need to be complied with prior to an issuance of securities.

The Nasdaq shareholder approval rules generally require companies to obtain approval from shareholders prior to issuing securities in connection with: (i) certain acquisitions of the stock or assets of another company (see HERE); (ii) equity-based compensation of officers, directors, employees or consultants (see HERE); (iii)

May 19, 2020

NYSE, Nasdaq And OTC Markets Offer Relief For Listed Companies Due To COVID-19

In addition to the SEC, the various trading markets, including the Nasdaq, NYSE and OTC Markets are providing relief to trading companies that are facing unprecedented challenges as a result of the worldwide COVID-19 crisis.

NYSE

The NYSE has taken a more formal approach to relief for listed companies. On March 20, 2020 and again on April 6, 2020 the NYSE filed a notice and immediate effectiveness of proposed rule changes to provide relief from the continued listing market cap requirements and certain shareholder approval requirements.

Recognizing the extremely high level of market volatility as a result of the COVID-19 crisis, the NYSE has temporarily suspended until June 30, 2020 its continued listing requirement that companies must maintain an average global market capitalization over a consecutive 30-trading-day period of at least $15 million. Likewise, the NYSE is suspending the requirement that a listed company maintain a minimum trading price of $1.00 or more over a consecutive 30-trading-day period,

April 21, 2020

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NASDAQ Listing Requirements

China Based Companies Continue To Face US Capital Market Scrutiny

SPAC Nasdaq Listing Standards

Nasdaq Board Diversity Proposal

Nasdaq Rule Amendments 2020

Nasdaq Proposed Rule Changes To Its Discretionary Listing And Continued Listing Standards

NASDAQ Provides Additional Relief To Shareholder Approval Requirements For Companies Affected By Covid-19

NYSE, Nasdaq And OTC Markets Offer Relief For Listed Companies Due To COVID-19

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