Nasdaq Listing Deficiencies And Delisting – Part 1

As 2022 and 2023 have continued to be extremely tough years for the capital markets, many small-cap companies find themselves failing to maintain the minimum continued listing requirements. I’ve recently written about those continued listing requirements – see HERE – and Nasdaq’s proposed rule changes for reverse split notifications as companies struggle to maintain the $1.00 minimum bid price requirement – see HERE.

These blogs provide a perfect segue for a deep dive into the Nasdaq deficiency notice and delisting process. In this first blog in the series, I provide an overview of deficiencies, deficiency notices, cure periods and compliance plans. In the Part 2, I will review the hearing panel process followed by appeals and ultimately delisting.

Overview – Deficiency Notices

When the Nasdaq Listing Qualifications Department determines that a company does not meet a listing standard, it will immediately notify the company of the deficiency. The notification will come in letter format, literally within a day of a deficiency determination. Deficiency notifications are one of four types:

Staff delisting determinations, which are notifications of deficiencies that, unless appealed, subject the Company to immediate suspension and delisting;
Notifications of deficiencies for which a company may submit a plan of compliance for staff review;
Notifications of deficiencies for which a company is entitled to an automatic cure or compliance period (generally 180 days); and
Public Reprimand Letters – which are not available for late periodic filings or the failure to timely hold a shareholder meeting.

When a company receives a notification that allows for a compliance plan or cure period which is not successful, it may ultimately result in a delisting determination.

Both a deficiency and delisting notice will contain the following information:

The factual bases for the staff’s determination and the quantitative or qualitative standard the company has failed to satisfy;
Instructions regarding the company’s obligations to disclose the deficiency under Nasdaq rules (i.e., an 8-K or press release within 4 days of receipt of the notification with most companies filing an 8-K);
One of the following depending on the type of notice: (a) Delisting determination – the date the company’s securities will be suspended; the right to request a review by a Hearing Panel; and that a request for review within 7 days will stay the suspension; (b) Deficiency requiring plan of compliance – the deadline for plan submittal; (c) Deficiency with automatic cure period – the expiration date of the cure period; and (d) Public Reprimand – an explanation of why the letter is appropriate and the company’s right to request review by a Hearings Panel.

Company Disclosure Obligations

A company that receives a notification of deficiency, Staff Delisting Determination, or Public Reprimand Letter is required to make a public announcement disclosing receipt of the notification and the rule(s) upon which the deficiency is based, and describing each specific basis and concern identified by Nasdaq in reaching its determination. Nasdaq allows notice to be made by either an 8-K or press release, but since Item 3.01 of Form 8-K requires an 8-K filing related to the receipt of a notice of delisting or listing deficiency, most companies only file the 8-K. However, if the notice resulted from the failure to file a periodic report required by the Securities Exchange Act, Nasdaq rules require both an 8-K and press release. The public notice must be provided to Nasdaq Market Watch 10 minutes before dissemination.

If the public announcement is not made by the Company within the time allotted or does not include all of the required information, trading of its securities shall be halted (if not already halted), even if the Company appeals Nasdaq’s determination. If the company’s failure to make this public announcement is the only basis for a trading halt, Nasdaq would ordinarily resume trading if Nasdaq itself makes the public announcement. If the Company fails to make the public announcement by the time that the hearings panel issues a decision, the failure to make the announcement will be added as a reason supporting delisting.

Deficiencies

Deficiencies Resulting in Immediate Delisting Determinations

Nasdaq may issue a notice of immediate delisting under the following circumstances (the list below does not include delisting events for ETS’s, REITs, trading subscription receipts or trading bonds):

Failure to timely solicit proxies;
A security that is in a 180-day compliance period for failure to meet the minimum bid price requirement and during such period has a closing bid price of $0.10 or below for ten consecutive trading days (note that a company will not be deemed deficient in the bid price requirement until its securities trade below the $1.00 minimum for 30 consecutive trading days);
A security fails to meet the bid price requirement and has affected one or more reverse splits over the prior two-year period with a cumulative ration of 250-to-1 or more;
A SPAC trading on the Nasdaq Global Market whose average market value of listed securities falls below $50 million or market value of publicly held shares falls below $40 million for 30 consecutive trading days. Note that Nasdaq will notify the company of this delisting standard if its market value of listed securities falls below $75 million or its market value of publicly held shares falls below $60 million; and
Nasdaq has determined that continued listing raises a public interest concern.

Deficiencies that Allow a Company to Submit a Plan of Compliance for Nasdaq Review

Unless a company is currently under review by an adjudicatory body for a delisting determination, a company may submit a plan of compliance if it is deficient in one of the following:

A quantitative standard that does not provide for an automatic compliance period including the stockholder’s equity, number of publicly held shares, number of public shareholders, revenue or asset requirements for the Nasdaq Capital Markets, Nasdaq Global Select and Nasdaq Global Markets respectively. For a review of these specific requirements, see HERE.
Deficiencies related to independent board members or committee requirements where the rule does not provide for an automatic cure period or such cure period is otherwise not applicable under the circumstances;
Deficiencies from rules related to: (a) shareholder meetings; (b) quorum; (c) related party transaction; (d) shareholder approval requirements; (e) auditor registration; (f) direct registration program; (g) code of conduct; or (h) voting rights;
Failure to make disclosures related to third-party directors and nominee compensation or failure to make a board diversity disclosure; or
Failure to file SEC periodic reports (no plan of compliance will be allowed for this if the company is currently under review for a delisting determination).

Plans for (i) through (iv) above must be submitted within 45 calendar days of a deficiency notice (with up to an additional 5 days with good cause) and plans for (v) within 60 calendar days (with up to an additional 15 days with good cause). If a company’s plan consists of transferring from the Nasdaq Global or Global Select Market to the Nasdaq Capital Market, the company should submit its application and the applicable application fee at the same time as its plan to regain compliance.

Nasdaq will not accept a plan of compliance related to revenue or asset deficiencies as these are generally historical in nature and require audited financial statements.

Upon submitting a plan of compliance, Nasdaq may either grant up to 180 days from the date of the initial notice to regain compliance, issue a delisting determination or issue a public reprimand letter. Where a compliance plan is granted related to delinquent SEC reports, the maximum time period will be 180 days from the due date of the first late report (though with a hearing panel this can be extended to a maximum of 360 days). Where compliance is granted with respect to an annual meeting, the maximum time period will be 180 days from the deadline to hold the annual meeting (one year after the end of the Company’s fiscal year).

The contents of a plan of compliance depend on the specific listing deficiency. However, in general, all plans of compliance should include the specific circumstances of the delinquency, likelihood of regaining compliance within the requested period, past compliance history, corporate events that may occur while delinquent, general financial status and disclosures to the market. Nasdaq will also consider third-party information such as from the audit committee, outside auditors, public information, SEC or other regulatory bodies.

The failure to regain compliance within a granted compliance period will result in delisting.

Deficiencies that Provide for an Automatic Cure/Compliance Period

Some Nasdaq ongoing listing requirements provide for an automatic cure or compliance period, including:

Bid Price – if a company fails to meet the minimum bid price requirement for 30 consecutive trading days, it will receive a deficiency notice from Nasdaq providing an automatic 180-day cure period. Regaining compliance requires trading above the minimum price for 10 consecutive business days; however, Nasdaq has the discretion to require up to 20 days as discussed below under “Nasdaq Discretion Relating to Price Based Requirements.” During the 180-day period, a company that is trading on the Nasdaq Global Market may transfer to the Nasdaq Capital Market as long as it meets the market value of listed securities continued listing requirement and all of the applicable initial listing requirements other than the bid price requirement.

A company may request an additional 180-day compliance period if at the 180th day of the first compliance period, it meets the market value of publicly held shares continued listing requirement and all of the applicable initial listing requirements other than the bid price requirement. The company must also explicitly notify Nasdaq of its intent to cure, generally through a reverse split. If the company has publicly announced information (e.g., in an earnings release) indicating that it no longer satisfies the applicable listing criteria, it shall not be eligible for the additional compliance period.

As indicated above, a security that is in a 180-day compliance period for failure to meet the minimum bid price requirement and during such period has a closing bid price of $0.10 or below for ten consecutive trading days, will receive an immediately delisting determination.

Market Makers – A failure to meet the continued listing requirement for a number of market makers shall be determined to exist only if the deficiency continues for a period of 10 consecutive business days. The company will then be provided with 30 calendar days to regain compliance. Regaining compliance requires having the minimum number of market makers for 10 consecutive business days.
Market Value of Listed Securities – A failure to meet the market value of listed securities listing standard exists after a deficiency continues for 30 consecutive business days and allows for a 180-day compliance period. Compliance can be regained by meeting the applicable standard for a minimum of 10 consecutive business days during the 180-day compliance period however Nasdaq has the discretion to require up to 20 days as discussed below under “Nasdaq Discretion Relating to Price Based Requirements.”
Market Value of Publicly Held Shares – A failure to meet the market value of publicly held shares listing standard exists after a deficiency continues for 30 consecutive business days and allows for a 180-day compliance period. Compliance can be regained by meeting the applicable standard for a minimum of 10 consecutive business days during the 180-day compliance period however Nasdaq has the discretion to require up to 20 days as discussed below under “Nasdaq Discretion Relating to Price Based Requirements.”
Independent Director and Audit Committee Rules – If a company fails to meet the majority board independence requirement or the audit committee composition requirement due to one vacancy, or because one director ceases to be independent for reasons beyond his/her reasonable control, the company will have until the earlier of its next annual shareholders meeting or one year from the event that caused the deficiency to cure. If the company’s next annual shareholders’ meeting is held sooner than 180 days after the deficiency, then the company has 180 days from the event to cure. Moreover, a company can only rely on the cure period for one audit committee composition for one director at the same time.
Diverse Board Representation – If a company fails to meet the diverse board composition or disclosure requirements, it will have until the later of its next annual meeting or 180 days to cure the deficiency.

Nasdaq Discretion Relating to Price-based Requirements

If a company fails to meet the market value of listed securities, market value of publicly held shares, bid price, or market value/principal amount outstanding requirements, each of which is related to the company’s security price and collectively called the “Price-based Requirements,” compliance can be regained by meeting the applicable standard for a minimum of 10 consecutive business days; however, Nasdaq has the discretion to require up to 20 days.

In determining whether to require additional compliance time to regain good standing, Nasdaq can consider all facts and circumstances, including: (i) the amount of time the company exceeds the applicable standard; (ii) trading volume (with low volume being a negative); (iii) market maker activity, including the number of market makers quoting at or above the $1 minimum price; and (iv) the trend of the security price (up or down).

Public Reprimand Letters

Nasdaq may issue a public reprimand letter when a company violates a corporate governance standard or fails to make or timely make a Nasdaq notification. In determining whether to issue the reprimand letter, Nasdaq will consider whether the violation was inadvertent, whether the violation materially adversely affected shareholders’ interests, whether the violation has been cured, whether the company reasonably relied on an independent advisor and whether the company has demonstrated a pattern of violations.

Nasdaq’s Discretionary Public Interest Authority – Rule 5101

In addition to the specific enumerated above, Nasdaq has broad discretionary authority over the continued listing of securities in order to maintain the quality of and public confidence in the market, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to protect investors and the public interest. Nasdaq may use such discretion to apply additional or more stringent criteria for continued listing of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes continued listing inadvisable or unwarranted in the opinion of Nasdaq, even though the securities meet all enumerated criteria for continued listing.

Under its discretionary authority Nasdaq may also take issue with an officer, director or substantial shareholder. In doing so, Nasdaq can request that the individual resign, divest themselves of securities, terminate contracts or give up voting rights.

Gayatri GuptaMarch 21, 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

Nasdaq Listing Deficiencies And Delisting – Part 1

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: