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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

November 29, 2022

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.

December 28, 2021

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

November 9, 2021

NYSE Annual Compliance Guidance Memo And Amended Rules

In January, NYSE Regulation sent out its yearly Compliance Guidance Memo to NYSE American listed companies. Although we are already halfway through the year, the annual letter has useful information that remains timely. As discussed in the Compliance Memo, the NYSE sought SEC approval to permanently change its shareholder approval rules in accordance with the temporary rules enacting to provide relief to listed companies during Covid. The SEC approved the amended rules on April 2, 2021.

Amendment to Shareholder Approval Rules

The SEC has approved NYSE rule changes to the shareholder approval requirements in Sections 312.03 and 312.04 of the NYSE Listed Company Manual (“Manual”) and the Section 314 related party transaction requirements. The rule changes permanently align the rules with the temporary relief provided to listed companies during Covid (for more on the temporary relief, see HERE

Prior to the amendment, Section 312.03 of the Manual prohibited certain issuances to (i) directors, officers or substantial shareholders (related parties),

July 20, 2021

The MEMX

Although overshadowed by all things ESG and SPAC related, a new Wall Street backed national exchange, the Members Exchange (MEMX), launched in Q4 2020 with ambitions to rival the NYSE and Nasdaq. In the same month, the long-anticipated launch of the Silicon Valley backed Long-Term Stock Exchange (LTSE) came to fruition. The MEMX, founded as a lower cost alternative to Nasdaq and the NYSE, started small, initially only trading the securities of 7 large cap companies including Alphabet and Exxon Mobil, but has since opened to all exchange traded securities.

The MEMX was backed by Blackrock, Charles Schwab, Citadel, Goldman Sachs, Bank of America, JP Morgan, E-Trade and Virtu, among others. These financial giants invested over $135 million into the platform and as such, have a vested interest in its success. They also have the power to direct significant trading activity onto the MEMX, where others will likely follow. In the 6 months since it went live,

May 4, 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

Audit Committees – NYSE American

Like Nasdaq, I’ve written several times about the NYSE American listing requirements including the general listing requirements (see HERE) and annual compliance guidelines (see HERE). As an aside, although the Nasdaq recently enacted significant changes to its initial listing standards, the NYSE American has not done the same and no such changes are currently anticipated. I suspect that the NYSE American will see a large uptick in new company applicants as a result.

I recently drilled down on audit committee requirements and director independence standards for Nasdaq and in this and the next blog, I will do the same for the NYSE American. As required by SEC Rule 10A-3, all exchange listed companies are required to have an audit committee consisting of independent directors. NYSE American Company Guide Rule 803 delineates the requirements independent directors and audit committees. Rule 803 complies with SEC Rule 10A-3 related to audit committees for companies listed on a national securities exchange.

January 26, 2021

Finders – Part 2

Following the SEC’s proposed conditional exemption for finders (see HERE), the topic of finders has been front and center. New York has recently adopted a new finder’s exemption, joining California and Texas, who were early in creating exemptions for intra-state offerings. Also, a question that has arisen several times recently is whether an unregistered person can assist a U.S. company in capital raising transactions outside the U.S. under Regulation S. This blog, the second in a three-part series, will discuss finders in the Regulation S context.

Regulation S

It is very clear that a person residing in the U.S. must be licensed to act as a finder and receive transaction-based compensation, regardless of where the investor is located. The SEC sent a poignant reminder of that when, in December 2015, it filed a series of enforcement proceedings against U.S. immigration lawyers for violating the broker-dealer registration rules by accepting commissions in connection with introducing investors to projects relying

January 12, 2021

SEC Proposes Amendments To Rule 144

I’ve been at this for a long time and although some things do not change, the securities industry has been a roller coaster of change from rule amendments to guidance, to interpretation, and nuances big and small that can have tidal wave effects for market participants. On December 22, 2020, the SEC proposed amendments to Rule 144 which would eliminate tacking of a holding period upon the conversion or exchange of a market adjustable security that is not traded on a national securities exchange. The proposed rule also updates the Form 144 filing requirements to mandate electronic filings, eliminate the requirement to file a Form 144 with respect to sales of securities issued by companies that are not subject to Exchange Act reporting, and amend the Form 144 filing deadline to coincide with the Form 4 filing deadline.

The last amendments to Rule 144 were in 2008 reducing the holding periods to six months for reporting issuers and one year

December 29, 2020

SEC Proposed Conditional Exemption For Finders

Over the years I have written many times about exemptions to the broker-dealer registration requirements for entities and individuals that assist companies in fundraising and related services (see, for example: HERE). Finally, after years of advocating for SEC guidance on the topic, the SEC has proposed a conditional exemption for finders assisting small businesses in capital raising. The proposed exemption will allow for the use of finders to assist small businesses in raising capital from accredited investors.

In its press release announcing the proposal, SEC Chair Clayton acknowledged the need for guidance, stating, “[T]here has been significant uncertainty for years, however, about finders’ regulatory status, leading to many calls for Commission action, including from small business advocates, SEC advisory committees and the Department of the Treasury. If adopted, the proposed relief will bring clarity to finders’ regulatory status in a tailored manner that addresses the capital formation needs of certain smaller issuers while preserving investor protections.”

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Cannabis Trade Association Makes Plea For National Exchange Listings

Update On Nasdaq And NYSE Direct Listings

Public Market Listing Standards

NYSE Annual Compliance Guidance Memo And Amended Rules

Audit Committees – NYSE American

Finders – Part 2

SEC Proposes Amendments To Rule 144

SEC Proposed Conditional Exemption For Finders

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