NYSE Amends Listing Standards Related To Reverse Splits To Meet Minimum Price
On January 15, 2025, the SEC approved amendments to NYSE Listed Company Manual Rule 802.01C to allow for an accelerated delisting process where a listed company uses a reverse split to regain compliance with the bid price requirement for continued listing, but that as a result of the reverse split, the company falls below other listing standards, such as the minimum number of round lot holders, or minimum number of shares in the publicly held float. In October 2024, the SEC approved a similar rule change for Nasdaq – see HERE.
The SEC also approved amendments to Rule 802.01C such that: (i) if a listed company has effected a reverse stock split over the prior one-year period; or (ii) has effected one or more reverse stock splits over the prior two year period with a cumulative ratio of 200:1 or more, the company shall not be eligible for any compliance period and will face immediate suspension and delisting.
Background
NASDAQ Proposes Amendment To Liquidity Listing Standard
On December 12, 2024, Nasdaq proposed an amendment to its liquidity listing standards for the Nasdaq Capital Market and Nasdaq Global Market such that the market value of unrestricted publicly held shares requirement could only be satisfied from the proceeds of the initial public offering. That is, Nasdaq would no longer count shares registered for re-sale by existing shareholders towards satisfying this listing standard. Nasdaq is also proposing to make similar changes affecting companies the uplist onto the Nasdaq from OTC Markets.
To list its securities on Nasdaq Capital Market or Nasdaq Global Market, 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.
Court Overrules Nasdaq Board Diversity Rule
The court has come to the rescue once again! On December 11, 2024, the 5th Circuit held that the SEC exceeded its authority in approving Nasdaq’s board diversity rule finding the rule was far removed from the purposes of the Securities Exchange Act’s regulatory regime. Rumor has it that the Nasdaq does not intend to appeal, meaning the board diversity rule may be DOA.
Background
On August 6, 2021, the SEC approved Nasdaq’s board diversity listing standards proposal adding new listing Rule 5606(a) (see HERE).
Nasdaq Rule 5606(a) requires Nasdaq listed companies to publicly disclose, in an aggregated form, to the extent permitted by law (for example, some foreign countries may prohibit such disclosure), information on the voluntary self-identified gender and racial characteristics and LGBTQ+ status of the company’s board of directors as part of the ongoing corporate governance listing requirements. Each company must provide an annual Board Diversity Matrix disclosure, including: (i) the total number of directors;
Introducing The OTCID
OTC Markets has announced the launch of a new market tier. Effective July 2025, Pink Current will become the OTCID, a basic reporting market requiring companies to meet minimal current information disclosures and provide management certifications. OTC Markets will still maintain the Pink Limited and Expert Market tiers for companies that do not qualify for the OTCID. OTC Markets has not yet published all of the requirements for the OTCID, but I suspect they will be similar to the existing Pink Current, with the addition of the management certifications.
I support the change and new branding opportunity. OTC Markets have struggled in recent years, primarily as a result of an inability for OTC Markets traded companies to obtain institutional financing or underwriter/placement agent banker support. Forever the optimist, the change could be just what is needed to revitalize the OTC Markets as a venture market place for U.S. micro-cap companies.
OTCID
Currently, the OTC Markets divides issuers into
Nasdaq Amends Bid Price Compliance Rules to Accelerate Delisting Process
On October 7, 2024 the SEC approved amendments to Nasdaq Rule 5810(c)(3)(A) to allow for an accelerated delisting process where a listed company uses a reverse split to regain compliance with the bid price requirement for continued listing, but that as a result of the reverse split, the company falls below other listing standards, such as the minimum number of round lot holders, or minimum number of shares in the publicly held float. This new rule is separate from another pending rule change that would accelerate the delisting 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.
These rule changes follow other recent rule changes meant to reduce the number of ultra micro-cap companies trading on the national exchange and tighten up compliance for those that do meet the standards. In March 2024, Nasdaq amended
Nasdaq and NYSE Clawback Rules
On October 26, 2022, the SEC adopted final rules on listing standards for the recovery of erroneously awarded incentive-based executive compensation (“Clawback Rules”) (see HERE). The Clawback Rules implement Section 954 of the Dodd-Frank Act and require that national securities exchanges require disclosure of policies regarding and mandating the clawback of compensation under certain circumstances as a listing qualification.
I’ve written about the Clawback Rules a few times, including SEC guidance (see HERE) but have not detailed the final Nasdaq and NYSE rules, until now.
Nasdaq Clawback Rules
Nasdaq listing Rule 5608 sets forth the listing requirements related to the recovery of erroneously awarded compensation. The language conforms closely to Rule 10D-1 and the SEC release, including explanations on materiality and “litter” restatements that are material based on facts and circumstances and existing judicial and administrative interpretations.
As allowed by Rule 10D-1, the Nasdaq rule provides that a company would not be required to pursue
Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 1
Although many years ago I wrote a high-level review of foreign private issuer (FPI) registration and ongoing disclosure obligations, I have not drilled down on the subject until now. While I’m at it, in the multi part blog series, I will cover the Nasdaq corporate governance requirements for listed FPIs.
Definition of a Foreign Private Issuer
Both the Securities Act of 1933, as amended (“Securities Act”) and the Securities Exchange Act of 1934, as amended (“Exchange Act”) contain definitions of a “foreign private issuer” (“FPI). Generally, if a company does not meet the definition of an FPI, it is subject to the same registration and reporting requirements as any U.S. company.
The determination of FPI status is not just dependent on the country of domicile, though a U.S. company can never qualify regardless of the location of its operations, assets, management and subsidiaries. There are generally two tests of qualification as a foreign private issuer, as follows:
Terminating Reporting Obligations In An Abandoned IPO
It has been a tough few years for small cap (and all) initial public offerings (IPOs). Although I have been seeing a small up-tick in priced deals recently, we are not yet near the highs of 2020 – 2022. Among the various challenges facing IPO issuers, lengthy Nasdaq/NYSE review periods and trouble building out sufficient allocations have been especially difficult resulting in a lengthier IPO process than expected.
An increased IPO timeline adds significant expense to the process. A registration statement cannot go effective with stale financial statement. Financial statements for domestic issuers go stale every 135 days requiring either a new quarterly review or annual audit and an amended registration statement. Likewise, financial statements for foreign private issuers (FPIs) go stale every nine months. When an issuer is nearing the end date for financial statements, and it appears that a closing of an IPO may be imminent, they sometimes choose to go effective and rely on Rule 430A.
NASDAQ Amends Rule 5210 – Listing Prerequisites
In March 2024, the Nasdaq Stock Market quietly amended Rule 5210 requiring that all lead underwriters on an IPO must be Nasdaq members or limited underwriting members as a prerequisite to applying for a listing. The new rules also created the “limited underwriting member” class and accompanying rules applicable to the group and its associates including eligibility, application process and ongoing requirements. Although the amendment garnered little attention at the time, now that it has become effective, it is loudly impacting the small cap IPO market.
Rule 5210 – Background
Nasdaq Rule 5210 sets forth the prerequisites for a company to apply for a Nasdaq listing. Until October 2023, the Rule had 12 subparts with new Rule 5210(l) being added in October 2023 and new Rule 5210(m) being added in March 2024. Rule 5210(l) requires that any company listing on Nasdaq comply with the recovery of erroneously awarded compensation (Clawback) rules. For more on the Clawback rules see HERE.
NASDAQ Issues New FAQ On MarketWatch News Submittals
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
