Nasdaq Proposes Stricter Listing Standards to Protect Investors

Nasdaq has proposed significant revisions to its listing standards, aiming to enhance investor protection and uphold market integrity. These proposals, submitted to the U.S. Securities and Exchange Commission (SEC) for approval, introduce stricter requirements for new listings and expedite the delisting process for underperforming companies.

Key Proposed Changes:

1. Minimum Public Float Requirement: New listings under Nasdaq's net income standard would be required to have a minimum market value of public float of $15 million.

2. Accelerated Delisting Process: Companies with a market value of listed securities below $5 million and failing to meet listing standards would face a faster suspension and delisting process.

3. Increased IPO Proceeds for China-Based Companies: Companies primarily operating in China would need to raise a minimum of $25 million in public offering proceeds to qualify for listing.

These measures are designed to address concerns over market manipulation, particularly involving small-cap and China-based companies. Nasdaq's review of trading activity revealed patterns associated with potential "pump-and-dump" schemes, especially in U.S. cross-market trading environments.

The $25 million minimum public offering proceeds requirement for China-based companies reinstates a standard previously set in 2020 for "restrictive markets," where the Public Company Accounting Oversight Board (PCAOB) could not inspect auditors. This move aims to strengthen investor protections and enhance the liquidity profile of such companies.

John Zecca, Executive Vice President and Global Chief Legal, Risk & Regulatory Officer at Nasdaq, emphasized the importance of these enhancements:

"Investor protection and market integrity are central to Nasdaq’s mission. These enhancements reflect our ongoing commitment to evolve our standards in step with market realities and to lead by example in promoting fair and orderly markets."

The proposed changes are part of Nasdaq's broader efforts to improve liquidity, tighten compliance timelines, and curb abusive practices such as excessive reverse stock splits. These measures are also in response to a surge in U.S. IPOs by Chinese firms, driven by favorable U.S. valuations and strict domestic regulations, despite ongoing U.S.-China tensions.

Authorities, including the FBI, have noted a 300% rise in complaints linked to pump-and-dump schemes. Nasdaq's proactive stance aims to mitigate such fraudulent activities and maintain the integrity of the U.S. capital markets.

Nasdaq's proposed enhancements to its listing standards represent a significant step toward strengthening investor protection and market integrity. By addressing concerns over market manipulation and ensuring robust compliance, these changes aim to foster a more transparent and trustworthy trading environment for all market participants.