SEC Fall 2023 Regulatory Agenda

On December 6, 2023, the SEC published its semi-annual Fall 2023 regulatory agenda (“Agenda”) and plans for rulemaking. The Agenda is published twice a year, and for several years I have blogged about each publication. Although items on the Agenda can move from one category to the next, be dropped off altogether, or new items pop up in any of the categories (including the final rule stage), the Agenda provides valuable insight into the SEC’s plans and the influence that comments can make on the rulemaking process.

The Agenda is broken down by (i) Proposed Rule Stage; (ii) Final Rule Stage; and (iii) Long-term Actions. The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The number of items to be completed in a 12-month time frame is 43, down from 55 on the Spring 2023 Agenda.

Fourteen items are included in the proposed rule stage, down from the 18 on the Spring 2023 list and 23 on the Fall 2022 list. Brand new to the Agenda and appearing on the proposed rule list is a multi-agency joint rulemaking proposal to establish data standards for the collection of information reported to each agency by financial entities under their jurisdiction, and the data collected from the agencies on behalf of the Financial Stability Oversight Council (FSOC).

Still on the proposed list in the ESG category are corporate board diversity and human capital disclosure. Although the SEC enhanced human capital disclosure requirements as part of its Item 101 of Regulation S-K (description of business) amendments, it is considering rule amendments to further enhance the disclosure requirements. For a discussion on the evolving human capital disclosure requirements, see HERE. Corporate board diversity is another hot topic and Nasdaq adopted its own board diversity rules in August 2021 – see HERE). Although the compliance deadline to add diverse directors was extended to December 31, 2023 (see HERE), the diversity matrix disclosure requirement has been in place for two years now. For more on the matrix, including practice tips, see HERE.

Remaining on the proposed list are amendments to requirements for filer validation and access to the EDGAR filing system and simplification of EDGAR filings which proposed rules were published in September 2023 (see HERE.) Also remaining on the proposed list are changes to Regulation D and Form D, including updating the financial thresholds in the accredited investor definition and “improving protections for investors.” I note that in August 2020, the SEC updated the definition of an accredited investor and specifically decided not to increase the financial thresholds (see HERE).

Still in the proposed rule stage are the controversial amendments to the Rule 144 holding period and Form 144 filings. In December 2020, the SEC surprised the marketplace by proposing amendment to Rule 144, which would prohibit the tacking of a holding period upon the conversion of variably priced securities (see HERE). The responsive comments have been overwhelmingly opposed to the change. Many of the opposition comment letters are very well thought out and illustrate that the proposed change by the SEC may have been a knee-jerk reaction to a perceived problem in the penny stock marketplace. I wholly oppose the rule change and hope the SEC does not move forward. For more on my thoughts on the damage this change can cause, see HERE

As I have blogged about many times, the SEC has been revisiting many rules that were implemented by the prior administration and facing legal challenges to rules adopted by this administration. In that regard, the disclosure of payments by resource extraction issuers (proposed rules published in December 2019 – see HERE) and finalized in December 2020 (see HERE) was moved to the proposed list in Spring 2022 indicating a revisit and has remained there since. However, as time goes by, it may be losing priority interest.

Revisions to the definition of securities held of record also remain on the proposed list. Any proposal would relate to the definition for purposes of Section 12(g) of the Exchange Act. For a review of the current rule, see HERE.

Other items still on the proposed list include incentive-based compensation arrangements related to financial institutions with $1 billion or more in total assets; fund fee disclosure and reform for registered investment companies (which was new to the Agenda in Spring 2022); rules to enable issuers of index-linked annuities to register on a form tailored specifically to registered index-linked annuities; exchange-traded products (which has been on the list for years); amendments to Regulation ATS to modernize the conditions to the ATS exemption for all ATSs; and rule changes to address concerns with national securities exchange volume-based transaction pricing in NMS stocks by requiring exchanges to make periodic public disclosures about those pricing models.

The newest Agenda has 29 items in the final rule stage, down from 37 on the Spring list. Several rules relate to environmental, social and governance (ESG) matters, including enhanced disclosures by investment companies and investments advisors addressing environmental, social and governance factors.

One of the biggest ticket items appearing on the Agenda and remaining in the final rule stage is the ESG centered climate change disclosure. On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. The rules are extremely robust and resulted in my longest blog series to date – eight segments. I will not bore my regular readers with a rehash – but the entire series can be read here – Part 1 – HERE; Part 2 – HERE; Part 3 – HERE; Part 4 – HERE; Part 5 – HERE; Part 6 – HERE; Part 7 – HERE; and Part 8 – HERE.

Another big-ticket item, special purpose acquisition companies (SPACs), remains in the final rule stage. On March 30, 2022, the SEC proposed rules enhancing disclosure requirements associated with SPAC initial public offerings (IPOs) and de-SPAC merger transactions; requiring that a private operating company be a co-registrant when a SPAC files an S-4 or F-4 registration statement associated with a business combination; requiring a re-determination of smaller reporting company status within four days following the consummation of a de-SPAC transaction; amending the definition of a “blank check company” to make the liability safe harbor in the Private Securities Litigation Reform Act of 1995 for forward-looking statement such as projections, unavailable in filings by SPACs and other blank check companies; and deeming underwriters in a SPAC IPO to be underwriters in a de-SPAC transaction when certain conditions are met. I wrote a six-part in-depth review of the proposed rules which can be read here – Part 1- HERE; Part 2 – HERE; Part 3 – HERE; Part 4 – HERE; Part 5 – HERE; and Part 6 – HERE.

Also remaining in final rule stage are amendments to the rules regarding the thresholds for shareholder proxy proposals under Rule 14a-8 which the SEC proposed in July 2022 (see HERE l). This topic has been painful for the regulatory system and market participants alike. After years of discussion and debate, the SEC adopted much-needed rule changes in September 2020 (see HERE) but then issued new guidance that wiped out the three prior published guidance bulletins – see HERE.

In a perfect example of how regulatory matters can jump around, in the final rule stage are amendments to the custody rules for investment advisors which moved from proposed to final in Spring and which have previously moved from proposed to long-term, back to proposed, back to long-term then on proposed for a full year before now jumping back to the final rule stage.

Holding steady in the final rule stage is equity market structure reform, including related to payment for order flow, order routing, conflicts of interest, best execution, market concentration, and the disclosure of best execution statistics. Gary Gensler gave a heads-up that this was a priority in his May 6, 2021 speech to the House Financial Services Committee (see HERE).

Continuing in the final rule stage are prohibitions of conflicts of interest relating to certain securitizations; open-end fund liquidity and dilution management; rules to enhance fund and investment adviser disclosures and governance relating to cybersecurity risks; amendments to require that market entities, including broker-dealers, clearing agencies and national exchanges, address cybersecurity risks, to improve the SEC’s ability to obtain information about significant cybersecurity incidents impacting market entities, and to improve transparency about cybersecurity risk in the U.S. securities markets; amendments to Form PF to require current reporting and amending the reporting requirements for large private equity advisers and large liquidity fund advisers and similar amendments for all filers; the matter of outsourcing by investment advisors and rules related to the oversight of third-party service providers; and changes to expand the clearing of government securities, including requiring written policies and procedures reasonably designed to require that every direct participant of the covered clearing agency submit for clearance and settlement all eligible secondary market transactions in U.S. Treasury securities to which it is a counterparty.

Also still in the final stage are cybersecurity risk governance, including potential amendments to Regulation S-P and Regulation SCI for broker-dealers and other registered market participants (for more on Regulation SCI, see HERE); conflicts of interest for clearing agencies of security-based swaps including regarding the registration and regulation of security-based swap execution facilities (“SBSEFs”); rules related to the disclosure of order execution; amendments to the NMS Plan for the consolidated audit trail data security; and the electronic filing of broker-dealer annual reports, financial information sent to customers, and risk-assessment reports and the electronic filing by clearing agencies and security-based swap entities.

Amendments to Regulation ATS for the registration of and reporting by alternative trading systems (ATS) for government securities are still on the final rule list, as are amendments to Exchange Act Rule 3b-16 regarding the definition of “Exchange” which were proposed in April 2023. Also still on the final rule list are amendments to Regulation NMS to prohibit a restricted competition trading center from internally executing certain orders of individual investors at a price unless the orders are first exposed to competition at that price in a qualified auction operated by an open competition trading center. The rule would also include limited exceptions to this general prohibition.

Amendments to the definition of dealers are still in the final rule stage. Proposed rules were published in March 2022 – see HERE. Also still in the final rule stage are amendments to certain rules of Regulation NMS to adopt variable minimum pricing increments for the quoting and trading of NMS stocks, reduce the access fee caps, and enhance the transparency of better-priced orders. I note that many of the final rules in this Agenda relate to order flow, clearing, execution and disclosure by broker-dealers and clearing firms.

Also holding steady on the final rule list are amendments related to the prohibition against fraud, manipulation, and deception in connection with security-based swaps and disclosure of security-based swap positions; and rules addressing and registration and regulation of security-based swap execution facilities.

Moving up from the proposed list to the final rule stage are amendments to the exemption for internet advisers from the prohibition against registration under the Investment Advisers Act of 1940; clearing agency recovery and wind-down plan; and amendments to Rule 15c3-3 (the customer protection rule) to require that certain large broker-dealers compute their customer and PAB reserve deposit requirements daily rather than weekly.

Also moving from proposed to the final rule stage is digital engagement practices for broker-dealers and investment advisors – i.e., gamification. Under the gamification category, the SEC is considering seeking public comment on potential rules gamification, behavioral prompts, predictive analytics, and differential marketing. Gary Gensler has been vocal about his concerns with gamification – see, for example HERE.

Just like in Spring, only seven items are listed as long-term actions. Continuing their tenure on the long-term action list is conflict minerals amendments; additional proxy process amendments; amendments to Rules 17a-25 and 13h-1 following creation of the consolidated audit trail (part of Regulation NMS reform); portfolio margining of uncleared swaps and non-cleared security-based swaps; and credit rating agencies’ conflicts of interest and transparency.

Amendments to the transfer agent rules also continue on the long-term list. It has been four years since the SEC published an advance notice of proposed rulemaking and concept release on new transfer agent rules (see HERE). Former SEC top brass suggested that it would finally be pushed over the finish line last year, but so far it remains stalled (see, for example, HERE).

Per usual, several items fell off the list either because they are no longer a priority or the rulemaking process has been completed.

Notably, amendments to beneficial ownership reporting under Section 13 which were proposed in March, 2022 – see HERE were completed and removed from the list (final rule blog coming soon). The amendments accelerate the filing deadlines for Schedules 13D beneficial ownership reports from 10 days to 5 calendar days and require that amendments be filed within two business day; generally accelerate the filing deadlines for Schedule 13G beneficial ownership reports (which differ based on the type of filer); extend the filing deadline to 10:00 p.m. EST; expand the application of Regulation 13D-G to certain derivative securities; clarify the circumstances under which two or more persons have formed a “group” that would be subject to beneficial ownership reporting obligations; provide new exemptions to permit certain persons to communicate and consult with one another, jointly engage issuers, and execute certain transactions without being subject to regulation as a “group”; and require that Schedules 13D and 13G be filed using XBRL.

Further amendments to exempt offerings, including Rule 701 and the integration rules, disappeared in Spring 2022 and remain off the list. In 2018 the SEC amended Rule 701 and issued a concept release seeking comment on potential further proposals (see HERE and HERE). Potential amendments to the reporting on proxy votes on executive compensation (i.e., say-on-pay – see HERE) remain off the priority list.

Likewise, final cybersecurity risk governance and disclosure rules were adopted and thus removed from the Agenda – see HERE. Also adopted and removed from the list is company securities lending arrangements. This rule implements Section 984(b) of the Dodd-Frank Act. Section 984 of the Dodd-Frank Act provides the SEC with the authority to increase transparency with respect to the loan or borrowing of securities. The SEC proposed a rule to increase the transparency and efficiency of the securities lending market by requiring any person that loans a security on behalf of itself or another person to report the material terms of those securities lending transactions and related information regarding the securities the person has on loan and available to loan to a registered national securities association (“RNSA”).

Revisions to -i.e. a re-write of – the Privacy Act (i.e., Freedom of Information Act or “FOIA”) to update and simplify the processes for submitting and receiving responses to Privacy Act inquiries, requests, and administrative appeals were finalized and dropped from the Agenda (see HERE.)

Gayatri GuptaFebruary 15, 2024

Nasdaq Compliance

The Nasdaq Stock Market features three tiers of listed companies, namely: (1) The Nasdaq Global Select Market, (2) The Nasdaq Global Market, and (3) The Nasdaq Capital Market. These tiers are characterized by progressively stringent listing requirements, with the Nasdaq Global Select Market setting the highest standards for initial listings and the Nasdaq Capital Market serving as the entry-level tier, particularly suitable for most small-cap issuers.

To list securities on Nasdaq, a company must fulfill minimum listing requirements, encompassing defined criteria related to financial performance, liquidity, and corporate governance. Nasdaq retains extensive discretion in the listing process and reserves the right to reject an application, even if the technical prerequisites are satisfied, if it deems such denial essential to safeguard the interests of investors and the public.

After securing a listing on Nasdaq, a company is obligated to adhere to ongoing listing standards. To initiate the listing process, a company seeking inclusion on Nasdaq must diligently complete and submit a comprehensive listing application to Nasdaq. This application should include specific documents and information as outlined by Nasdaq's requirements.

Typically, the application process spans a duration of four to six weeks. Once the application is submitted, a Nasdaq analyst is designated as the primary liaison with the company. Within two to three weeks of submission, the company can expect to receive an initial comment letter. The comment and review process persists until a decision is reached on the approval or denial of the application. Similar to filing with the SEC, a meticulously prepared Nasdaq application tends to attract fewer comments and facilitates a more streamlined process. Generally, the company's securities counsel assumes a leading role, serving as the primary contact for preparing the application and engaging in communication with Nasdaq.

Similarly to the SEC review process, Nasdaq conducts a thorough examination of publicly accessible information pertaining to a company. This encompasses, but is not limited to, SEC filings, the company's website, management communications and speeches, as well as press releases. The iterative nature of the review process typically doesn't necessitate a formal protocol, and communication is commonly facilitated through email correspondence and phone calls.

Listing Criteria For Nasdaq
For a company to list its securities on Nasdaq, it must satisfy the following criteria:

Specific Initial Requirements:
- Quantitative Standards: Meeting defined thresholds for both quantitative and qualitative factors.
- Qualitative Standards: Fulfilling certain qualitative benchmarks.
Continuing Requirements:
- Quantitative Criteria: Adhering to ongoing quantitative benchmarks.
- Qualitative Criteria: Maintaining specified qualitative standards.

The initial quantitative thresholds are typically set at a higher level than those required for continued listing. This distinction aims to ensure that companies achieve a sufficient level of maturity before being listed. Additionally, Nasdaq imposes rigorous corporate governance standards that listed companies must adhere to throughout their tenure on the exchange.

Before formally submitting a comprehensive listing application, a company has the option to pursue a preliminary listing eligibility review. In this stage, the Listing Qualifications Staff conducts a thorough examination of the company's public filings to assess its compliance with numerical listing requirements. Additionally, the team evaluates the company's adherence to corporate governance requirements outlined in the Marketplace Rules ("Rules"). This preliminary review provides valuable insights into the company's eligibility for listing on Nasdaq before committing to the full application process.

Upon completion of the preliminary review, the Listing Qualifications Staff will make an assessment regarding whether the company meets the numerical listing criteria. Additionally, any corporate governance or regulatory concerns raised during this phase will be considered to determine their impact on the listing approval. It's important to note that while the preliminary review provides insights, final approval necessitates the submission of a formal listing application. This application undergoes a thorough examination by the NASDAQ Listing Qualifications Staff. Furthermore, the final approval process involves satisfactory compliance with specific qualitative reviews. This includes an examination of the regulatory history of the company's officers, directors, and significant shareholders. Meeting these criteria is integral to obtaining the final approval for listing on Nasdaq.

Financial And Liquidity Requirements

    Requirements

    Equity Standard
    Market Value of Listed Standard
    Net Income Standard

    Listing Rules

    5505(a)
and
5505(b)(1)
    5505(a)
and
5505(b)(2)
    5505(a)
and
5505(b)(3)
    
    Stockholders Equity

    	$5 million
    	$4 million
    	$4 million
    
    The market value of publicly held shares

    $15 million
    $15 million
    $
      5 million
    
    Operating History

    	Two years
    N/A
    N/A
    
    The market value of listed securities

    N/A
    $50 million
    N/A
    
    Net income from continuing operations (in the latest fiscal
a year or in two of the last three
fiscal years)

    N/A
    N/A
    $750,000
    
    Publicly held shares

    	1 million
    	1 million
    	1 million
    
    Bid Price

    	$4
    	$4
    	$4)
    
    Closing Price

    	$3
    	$2
    	$43
    
    Corporate Governance

    Yes
    Yes
    Yes
    
    Total Shareholders

    300
    300
    300

Corporate Governance Requirements

Across all three tiers of the Nasdaq Stock Market, corporate governance requirements remain largely consistent. The categories encompassing corporate governance standards include:

Distribution of Annual or Interim Reports
Independent Directors
Audit Committee
Compensation Committee
Nomination of Directors
Code of Conduct
Annual Meetings
Solicitation of Proxies
Quorum
Conflict of Interest
Shareholder Approval
Voting Rights

These governance elements play a crucial role in ensuring transparency, accountability, and ethical conduct within listed companies, irrespective of the specific tier within the Nasdaq Stock Market.

Companies seeking listing on Nasdaq must adhere to specific corporate governance standards, including the following:

Compensation Committee with Independent Directors:
- The company is required to establish a compensation committee comprised of independent directors.
- The committee must consist of at least two members.
- Rule 5605(d)(2)(A) introduces an additional independence test for compensation committee members.
Responsibility for Executive Compensation:
- The compensation committee is tasked with determining or recommending to the entire board the compensation of the chief executive officer (CEO) and all other executive officers.

These standards are designed to ensure a level of independence and scrutiny in the decision-making processes related to executive compensation within the company.

The Application And Documents

The Nasdaq application package encompasses several key components:

Symbol Reservation Form:
- Used to request the reservation of a specific trading symbol for the company.
Listing Application:
- Requires supplemental documents and details about the company's financials, operations, and other pertinent information.
Listing Agreement:
- A formal agreement outlining the terms and conditions of the listing on Nasdaq.
Corporate Governance Certification:
- A certification affirming the company's commitment to meeting Nasdaq's corporate governance standards.
Initial Application Fee:
- Payable via check or wire transfer, this fee is a prerequisite for initiating the listing process.
Logo Submission Form:
- Used for submitting the company's logo for use in Nasdaq's materials.

These application forms are completed through the Nasdaq website listing center, utilizing the online platform to facilitate the submission of supplemental and supporting documents. It is advisable to thoroughly review all required paperwork in advance, ensuring that the necessary information is readily available before initiating the application process.

Symbol Reservation Form

The symbol reservation form is a concise, one-page electronic form where applicants input information for Nasdaq's consideration. Nasdaq symbols, limited to 1-5 characters, adhere to guidelines established by the Intermarket Symbols Reservation Authority (ISRA). The ISRA system is designed to organize symbols efficiently, prevent duplication, and reduce programming and operational complexities. The ISRA operates within the framework of the NMS Symbology Plan, a plan utilized by Nasdaq.

Key details about the symbol reservation process:

Symbol Choices:
- The form allows applicants to propose three symbol choices in order of preference.
- While Nasdaq generally honors the first choice if available, it retains the authority to assign, rescind, or reassign a trading symbol at its discretion.
ISRA and Nasdaq Authority:
- The ISRA and Nasdaq have overarching authority in managing the assignment of symbols.
Additional Information:
- The form captures essential details about the issuer and the planned public offering.
- Information may include the name of the attorney, lead underwriter (if applicable), CEO and CFO names, yearly revenues, company website, and the sector in which the company operates.

Completion of this symbol reservation form initiates the process of securing a trading symbol on Nasdaq, and it's essential to provide accurate and comprehensive information to facilitate this stage of the listing application.

The Application

The Nasdaq listing application process is comprehensive and varies based on the circumstances surrounding the listing sought. There are twelve distinct listing applications catering to different situations, including changes of control, switches from other exchanges or markets, spin-offs, and initial public offerings (IPOs). Each application, spanning approximately seven pages, collects detailed information about the company, covering areas such as address, contact and billing details, securities attorney and auditor information, transfer agent particulars, and the company's officers and directors. Specific information on the company's securities, including type, par value, and cusip number, is also required.

Furthermore, the application mandates disclosure of legal proceedings involving the company, its officers or directors, or significant shareholders over the past ten years. This encompasses inquiries, investigations, lawsuits, litigation, arbitrations, and other legal and administrative proceedings. Documents supporting the backup and final disposition of these matters must be provided.

Regarding private offerings within the prior six months, including bridge financings, shelf registrations, and Regulation S offerings, the company is required to disclose such activities. Additionally, the application delves into the company's background, posing questions to ensure compliance with seasoning rules.

While Nasdaq retains the right to request relevant supporting documents, specific documents are mandatory based on the application type. For an uplisting from an existing U.S. market, the application must include letters from three market makers confirming their commitment to making a market in the subject securities. Other required documents include a listing agreement, a logo submission form, a corporate governance certification form, regulatory correspondence over the past 12 months, and shareholder confirmation documents. Nasdaq often seeks confirmation from the company's transfer agent regarding the eligibility of the security for the direct registration program (DRS).

During the review of an up listing application, Nasdaq may request additional information, such as a Broadridge share range analysis and NOBO list, a certified shareholder list, details about mitigating any going concerns or opinions, income statement and/or balance sheet projections for the next 12 months, and confirmation of Sarbanes Oxley Section 302 and 906 certifications by the company, among other inquiries related to compliance and financial matters.

The Listing Agreement

The Listing Agreement is a concise document, spanning two pages, serving as a formal affirmation of the company's commitment to adhere to all rules and regulations set forth by the Nasdaq Stock Market. It includes provisions for indemnifying and holding Nasdaq harmless from liability. Notable points in the agreement include:

Compliance Assurance:
- The company explicitly agrees to comply with all rules and regulations stipulated by the Nasdaq Stock Market.
Indemnification Clause:
- The company indemnifies Nasdaq, meaning it undertakes to compensate or reimburse Nasdaq for any losses or damages incurred. This includes harm resulting from third-party trademark infringement claims related to the company's symbol and logo, as well as Nasdaq's use of the same.
Disclaimer of Warranty and Liability:
- The agreement contains a disclaimer of warranty and liability against Nasdaq for trading issues, with the exception of those resulting from gross negligence or willful misconduct.

This agreement establishes a clear framework for the relationship between the listed company and Nasdaq, emphasizing the company's commitment to regulatory compliance while providing indemnification for certain specified matters and delineating the scope of Nasdaq's liability.

Corporate Governance Certification Form

The corporate governance certification form certifies compliance with the governance requirements related to an audit committee, director nomination process, compensation committee, board composition, executive sessions, quorum, and codes of conduct. Where an exemption applies, the form requires specification of the exemption terms. The document specifies the different rules and exceptions in a check-the-box format.

Logo Submission Form

The logo submission form contains the guidelines for the logo and affirms Nasdaq’s rights to use the same. Nasdaq uses company logos in its marketing materials, on the MarketSite Video Wall and Tower, and websites.

Fees

Entry fees are based upon the aggregate number of shares to be listed at the time of initial listing, regardless of class, with a maximum cap of $75,000. Fees are assessed on the entry date in The Nasdaq Capital Market, except for $5,000, representing a non-refundable application fee. This fee must be submitted with the company’s application.

Nasdaq does not charge application or entry fees for any securities transferred from a national securities exchange.

Benefits Of Trading On An Exchange

There are many benefits to trading on an exchange instead of the OTC Markets. The most significant benefits to a business are the ability to attract analyst coverage and institutional investors and the corresponding increase in liquidity that comes with both. Stocks that trade on Nasdaq tend to have a lower bid/offer spread — again encouraging trading volume and liquidity. Exchange-traded securities are exempt from the penny stock definition, allowing more market maker and broker-dealer participation. As further explained below, a broker-dealer cannot recommend a penny stock transaction to its retail clients. Therefore, no analysts, financial advisors, or institutional investors make recommendations for purchases of penny stocks.

As an aside, this is one of the reasons that OTC Markets created the OTCQX market tier, which does not list penny stocks. It is also why the small-cap industry is pushing for a supported valid venture exchange (for further reading.

In today’s world, depositing stock and/or trade-in non-exchange traded securities is increasingly difficult. Despite the congressional efforts and SEC rulemaking in support of small-cap capital formation (for example, the JOBS Act, including the emerging growth company regulations, new Regulation A+ and Title III Crowdfunding and the new FAST Act), through enforcement and investigative proceedings, both the SEC and FINRA continue to apply pressure on broker-dealers, clearing firms and transfer agents to reduce the secondary trading and free flow of penny stocks. For more information on difficulties in depositing stocks.

Further On Penny Stocks

NASDAQ and NYSE MKT traded securities are exempted from the definition of a “penny stock” due to the initial and ongoing listing standards. Penny stock rules focus on broker-dealers’ activity in effectuating trades in penny stocks. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 (the “Penny Stock Act”) prohibits broker-dealers from effecting transactions in penny stocks unless they comply with the requirements of Section 15(h) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The rules promulgated thereunder, particularly Exchange Act rules 15g-1 through 15g-100 (the “penny stock rules”).

Section 15(h) of the Exchange Act provides that no broker or dealer may effectuate a customer’s purchase or sale of any penny stock unless such broker or dealer.

Approves the customer for the specific penny stock transaction and receives a written agreement to the transaction from the customer.
Furnishes the customer a risk disclosure document describing the risks of investing in penny stocks.
Discloses to the customer the current market quotation, if any, for the penny stock, including the bid and ask prices and the number of shares that apply to such bid and ask prices.
Discloses to the customer the amount of compensation the firm and its broker will receive for the trade.

In addition, after executing the sale, a broker-dealer must send its customer monthly account statements showing the market value of each penny stock held in the customer’s account.

Moreover, brokers and dealers subject to the penny stock rules are subject to additional disclosure requirements outlined in Rules 15g-2 through 15g-9. For my information on penny stocks and the rules affecting broker-dealer activity.

Securities Lawyer Blog

SEC Fall 2023 Regulatory Agenda

Listing Criteria For NasdaqFor a company to list its securities on Nasdaq, it must satisfy the following criteria:

Licensed in District of Columbia, State of Colorado, US District Court for the District of Columbia, US District Court for the District of Colorado, with pro hac vice Admission for the State of Maryland and Virginia.

Listing Criteria For Nasdaq
For a company to list its securities on Nasdaq, it must satisfy the following criteria: