SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 1

On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions. The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs. The new rules spread beyond SPACs to shell companies and blank check companies in general.

The SEC is specifically requiring enhanced disclosures with respect to compensation paid to sponsors, conflicts of interest, dilution, and the determination, if any, of the board of directors (or similar governing body) of a SPAC regarding whether a de-SPAC transaction is advisable and in the best interests of the SPAC and its shareholders. The SEC has also adopted rules that deem any business combination transaction involving a reporting shell company, including a SPAC, to involve a sale of securities to the reporting shell company’s shareholders, and has amended several financial statement requirements applicable to transactions involving shell companies.

In addition, the new rules require 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; minimum dissemination periods for the distribution of shareholder de-SPAC communications; require a re-determination of smaller reporting company status within four days following the consummation of a de-SPAC transaction; and amend 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. Although the SEC did not adopt proposed rule that would deem underwriters in a SPAC IPO to be underwriters in a de-SPAC transaction, they have provided guidance under the current rules which could result in the same conclusion. Moreover, the rules provide guidance on investment company determinations which impact all public companies.

On March 30, 2022, the SEC published the proposed rules. At the time 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. Similarly, I am writing a multi-part deep dive blog series into these highly impactful new rules.

Background

A special purpose acquisition company (SPAC) is a blank check shell company formed for the purpose of effecting a merger, share exchange, asset acquisition, or other business combination transaction with an unidentified target, within a set period of time. The business combination transaction is commonly referred to as a “de-SPAC” transaction.

SPACs are formed by sponsors who believe that their experience and reputation will facilitate a successful business combination and public company. SPACs are often sponsored by investment banks together with a leader in a particular industry (manufacturing, healthcare, consumer goods, etc.) with the specific intended purpose of effecting a transaction in that particular industry. However, a SPAC can be sponsored by an investment bank alone, or individuals without an intended industry focus.

SPACs follow substantially the same structure. A sponsor receives founder shares for a fixed price of $25,000, which founder shares will typically represent 20% of the total issued and outstanding capital stock immediately following the closing of the SPAC IPO (the “promote” or “founder’s shares”). The sponsor must also invest enough capital to cover the IPO costs, ongoing SPAC legal and accounting fees, and costs associated with the de-SPAC transaction (locating and conducting due diligence on a target and transaction costs associated with the business combination), which is approximately 5% of the total IPO amount. These funds are usually invested via a private placement referred to as the sponsor PIPE. The terms of the sponsor PIPE are more favorable than the IPO terms. The sponsor PIPE may involve a different class of stock, warrants or a combination of both. The founder shares and sponsor PIPE often result in a sponsor owning 25% or more of the post IPO SPAC.

The SPAC IPO process is the same as any other IPO process. That is, the SPAC files a registration statement on Form S-1 or F-1 that is subject to a comment, review, and amendment process until the SEC clears comments and declares the registration statement effective. Concurrent with the S-1/F-1 process, the SPAC will apply for listing on a national exchange. Differing from traditional IPOs, the underwriter typically only charges 5-5.5% of the offering proceeds (traditional IPO fees are closer to 7%) and usually a significant portion of those fees – around 3% – are conditioned on the completion of a de-SPAC transaction. Following its IPO, the SPAC places all or substantially all of the IPO proceeds into an escrow account pending completion of a business combination transaction. The funds in the escrow account are usually invested in treasury or similar securities which has resulted in questions as to whether a SPAC operates as an investment company.

A SPAC generally has 24 months to complete a business combination; however, it can get up to one extra year with shareholder approval. If a business combination is not completed within the set period of time, all money held in escrow goes back to the shareholders and the sponsors will lose their investment. Accordingly, sponsor capital is at risk – sponsors do not make money unless a successful business combination is completed. Also, since the sponsor’s investment is at much better terms than the IPO investors (20% off the top for a nominal amount), the sponsor has incentives to complete a de-SPAC transaction on terms that are less favorable than they otherwise might consider. This dynamic creates an inherent conflict of interest between the sponsor and the SPAC shareholders.

Upon entering into an agreement for a business combination, the SPAC will file an 8-K or 6-K then proceed with the process of obtaining shareholder approval for the transaction. In addition to approving the de-SPAC transaction, the shareholder approval usually includes several changes to the constituent documents including a name change, authorization of additional securities, possibly a reverse split, etc.). Prior to the closing of the de-SPAC transaction, the shareholders of the SPAC have the opportunity to either: (i) require the SPAC to redeem their common shares and receive a pro rata share of the amount in the IPO proceeds held in the escrow account, or (ii) remain a shareholder of the surviving company after the business combination. A SPAC shareholder may vote “yes” on the business combination and still redeem their common shares. Moreover, regardless of the common share redemption choice, the shareholder may keep their warrants to ride any potential upside in the transaction. To offset redemptions, a SPAC often raises new money through a PIPE.

The value of the de-SPAC transaction is negotiated by the sponsor, the target and any investors that are putting in new money at the closing (the closing PIPE) and as a result, the valuation of a target entity may be higher in a SPAC transaction than a traditional IPO. In a traditional IPO, neither the underwriter nor the IPO company rely on future growth projections and projections are almost never included in a registration statement or as part of a road show. The reason is that the Securities Act imposes the stricter Section 11 liability standard on a company and its underwriters in an IPO process. Among other issues, the new rules address this disparity.

Although a de-SPAC is structured as a merger or acquisition transaction, the SEC rightfully views it as the functional equivalent to an initial public offering as the transaction results in the target company going public and having access to capital markets funding from the initial SPAC IPO investors and/or new investors.

In 2020 and 2021 SPAC popularity reached an all-time high with 248 and 613 SPAC IPOs respectively. The previous high was 50 SPAC IPOs in 2019. In addition to publishing the proposed rules that precipitated these final rules, the SEC chilled SPACs beginning in April 2021 when it questioned SPAC warrant accounting causing a temporary standstill on transactions followed by a slew of accounting restatements (see HERE). On March 10, 2021, the SEC issued an investor alert warning of celebrity-backed SPACs and on March 31, 2021, the SEC issued two statements on SPACs. One highlighted certain issues, including relating to shell status, and the other on financial reporting and audit considerations. Then again on April 8, 2021, the SEC issued another statement on SPACs, that time from John Coates, then Acting Director of the Division of Corporation Finance (see HERE).

In addition to regulatory issues, SPACs have been plagued with post de-SPAC shareholder litigation and class action lawsuits. In 2023 there were only 31 SPAC IPOs and many SPACs dissolved without completing transactions. Regardless the SEC pushed forward with the new rules noting that “[W]hile we recognize that the number of SPAC IPOs has declined since 2021, the investor protection concerns regarding SPACs and the hybrid nature of the de-SPAC transaction identified in the Proposing Release do not depend on market fluctuations.”

Summary of New Rules

The final new rules add new Subpart 1600 to Regulation S-K which will: (i) require additional disclosures about the sponsor of the SPAC, potential conflicts of interest, and dilution; (ii) require additional disclosures on de-SPAC transactions, including that the SPAC disclose (a) whether law of the SPAC organizational jurisdiction requires the board of directors to determine whether the de-SPAC is advisable and in the best interests of the SPAC shareholders or make a comparable determination, and to disclose that determination, and (b) whether the SPAC or SPAC sponsor has received any outside report, opinion, or appraisal relating to the de-SPAC transaction and certain disclosures pertaining to such report, opinion or appraisal; and (iii) require certain disclosures on the prospectus cover page and in the prospectus summary of registration statements filed in connection with SPAC IPOs and de-SPAC transactions.

The SEC has also adopted amendments to align disclosures and legal obligations with a traditional IPO. In particular, the new rules: (i) amend the registration statement forms and schedules filed in connection with de-SPAC transactions to require additional disclosures about the target company; (ii) provide that the target company in a de-SPAC transaction is a co-registrant on the registration statement used for a de-SPAC transaction, such that the target company and its signing persons would be subject to liability under Section 11 of the Securities Act as signatories to the registration statement; (iii) require a re-determination of smaller reporting company status following the consummation of a de-SPAC transaction; and (iii) amend the definition of “blank check company” to encompass SPACs and certain other blank check companies for purposes of the Private Securities Litigation Reform Act of 1995 (PSLRA) such that the safe harbor for forward-looking statements under the PSLRA is not available to SPACs, including with respect to projections of target companies seeking to access the public markets through a de-SPAC transaction.

The new rules are not limited to SPACs but also encompass all shell companies that complete reverse acquisitions. The SEC has adopted new Securities Act Rule 145a that deems any business combination of an Exchange Act reporting shell company with another entity that is not a shell company, to involve the sale of securities to the reporting shell company’s shareholders. For purposes of new Rule 145a, the term “reporting shell company” is defined as a company, other than an asset-backed issuer as defined in Item 1101(b) of Regulation AB, that has: (i) no or nominal operations; (ii) either: (a) no or nominal assets; (b) assets consisting solely of cash and cash equivalents; or (c) assets consisting of any amount of cash and cash equivalents and nominal other assets; and (iii) an obligation to file reports under Section 13 or Section 15(d) of the Exchange Act (for more on reporting obligations see HERE).

The implications of this new rule are astounding. The rules already require the filing of financial statements and Form 10 information for the acquired business in a Form 8-K within four business days of the closing of a transaction (see HERE/); however, this new rule will require a shell company to file a registration statement on Form S-4 or F-4 or determine the availability of a registration exemption for its existing shareholders prior to the closing of a transaction. My belief is that it would be difficult if not impossible to find an available exemption and as such, every reporting shell company business combination will require a registration statement.

The SEC has also adopted new Article 15 of Regulation S-X, to more closely align the financial statement reporting obligations in a business combination involving a shell company and a target company with those in traditional IPOs. In May 2020, the SEC amended the financial statement and disclosure requirements related to the acquisitions and dispositions of businesses in an effort to reduce the complexity and compliance costs associated with these transactions for reporting companies (see HERE). Those rules apply across the board to all companies, whether a shell or not.

In essence, if a company is a shell, any acquisition would be significant and audited financial statements and Form 10 information on the target company would be required in a Form 8-K within four business days of closing. The new rules would not only amend portions of the May 2020 amendments, but would also clarify the requirements in the closing 8-K. Since Form 8-K allows for incorporation by reference, and since under the new rules a full S-4 or F-4 would have been filed prior to closing, presumably, in practice a Super 8-K would become a relatively short document incorporating the S-4 or F-4 prospectus.

The SEC has also provided guidance regarding potential underwriter status under Section 2(a)(11) of the Securities Act in de-SPAC transactions.

Finally, the SEC has issued guidance regarding the status of SPACs under the Investment Company Act of 1940 (’40 Act). The proposed rules provided for a limited exemption under the ’40 Act for SPACs which the SEC determined not to adopt. Rather, the SEC has issued guidance to help determine whether a SPAC is acting as an investment company based on individual facts and circumstances.

Effective Date

The new rules are effective 125 days following publication in the Federal Register.

Gayatri GuptaMarch 5, 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 Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – 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: