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Key Takeaways
On December 19, 2025, the U.S. Securities and Exchange Commission ("SEC") published a notice to solicit comments on the proposal to provide Nasdaq with limited discretion to deny initial listings even when applicants meet all stated listing requirements.1 Nasdaq's proposal stemmed from its observation of unusual trading in securities of certain companies, noting the SEC has imposed temporary trading suspensions pursuant to Section 12(k) of the Securities Exchange Act of 1934, as amended, with respect to listed securities based upon concerns about potential market manipulation as a result of recommendations made to investors by unknown persons via social media platforms.
"The [SEC] stated its belief that these recommendations appear to be designed to artificially inflate the price and volume of the securities and that the public interest and the protection of investors require a suspension of trading in the securities."2
The proposed rule change would become effective immediately and Nasdaq intends to apply the rule to all companies, including those currently in the application process.
Background
In its proposal3, Nasdaq cited SEC suspension orders from 2025 for companies mostly incorporated in the Cayman or British Virgin Islands with executive offices located in Asia (Singapore, Hong Kong, Malaysia, Indonesia, Japan and China).4
As set forth in Nasdaq Rule 5101, "...[Nasdaq] has broad discretionary authority over the initial and continued listing of securities in Nasdaq in order to maintain the quality of and public confidence in its 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."5 While Nasdaq Rule 5101 provides Nasdaq with limited authority to deny a securities listing, it does not permit Nasdaq to deny a listing based on the potential for unaffiliated third parties to engage in misconduct impacting a company's securities.
Discretionary Grounds for Denial of a Listing
New Rule IM-5101-36 outlines non-exhaustive factors for identifying companies whose securities may be vulnerable to manipulation, even if they satisfy all formal listing requirements.For example, Nasdaq would consider:
Location of Company.The company's location including considerations such as the availability of legal remedies to U.S. stockholders in that jurisdiction, laws of the foreign jurisdiction that may present challenges to regulators seeking to enforce regulations against such company and the ability of parties to conduct diligence in that jurisdiction.
Influence and Control.Whether a person or entity exercises substantial influence over the company and, if so, where that person or entity is located, availability of legal remedies to U.S. stockholders in that jurisdiction, and laws of the foreign jurisdiction that may present challenges to regulators seeking to enforce rules against the person or entity and the ability of parties to conduct diligence in that jurisdiction.
Key Advisors.Whether there are concerns related to the company's auditors, underwriters, legal counsel, brokers, or other professional service providers, including any regulatory issues involving such advisors as well as their participation in transactions where the securities were subject to patterns of problematic trading activity.
Management and Board Experience; Integrity.Whether the company's management and board have experience with U.S. public company requirements, including regulatory and reporting requirements under Nasdaq rules as well as the rules of the SEC and whether there are concerns about the integrity of the Company's management, board, significant stockholders and/or advisors.
Regulatory Referrals. Whether there are any FINRA, SEC or other regulatory referrals concerning the Company or its advisors.
Liquidity. Whether the company has or had a going concern audit opinion and the company's plan to remediate such concern.
Notice and Appeal
Under the new rule, if Nasdaq determines to deny an initial listing based upon its expanded authority, Nasdaq will issue a written notice to the company describing the basis for its decision. The company will have four business days from the date of such notice to make a public announcement regarding such notice. The company may request a hearing before the Nasdaq Hearings Panel to review the determination within seven calendar days of the Nasdaq notice.
Practical Considerations
This new rule, if adopted, will permit Nasdaq to deny initial listings even when all listing requirements have been met, placing a greater importance on transparency requirements for foreign companies. Before beginning the listing process, foreign companies should consult with their counsel regarding several important considerations. This includes evaluating the board and management team's experience and familiarity with U.S. public company obligations, planning for potential going concern challenges, thoroughly vetting key advisors, and conducting diligence on significant stockholders.
Other Nasdaq Rules and Proposals
On December 15, 2025, the SEC approved Nasdaq's proposed amendments raising the minimum market value of unrestricted publicly held sharesrequired for new listings under the net income standard to $15 million for listings on The Nasdaq Capital Market (previously $5 million) and The Nasdaq Global Market (previously $8 million).7 Nasdaq stated "...that it believes that these proposed changes will help ensure that there is a sufficient initial pool of liquidity available to support liquid trading on the Exchange."8 The SEC is still considering Nasdaq's proposal to, among other things, (i) establish a minimum $25 million initial public offering size for companies primarily operating in the People's Republic of China, including Hong Kong and Macau; (ii) require that China-based companies uplisting from the OTC Markets or another national securities exchange have a minimum market value of unrestricted publicly held sharesof at least $25 million and have traded on the other market for at least one year; and (iii) prohibit a China-based company from direct listing onto The Nasdaq Capital Market.9
Footnotes
1 https://www.sec.gov/files/rules/sro/nasdaq/2025/34-104464.pdf
2 Id.
3 https://listingcenter.nasdaq.com/assets/rulebook/nasdaq/filings/SR-NASDAQ-2025-104.pdf
4 (i) Smart Digital Group, Limited (Suspension Order: September 29, 2025; incorporated in the Cayman Islands; principal executive offices located in Singapore); (ii) QMMM Holding Limited (Suspension Order: September 26, 2025; incorporated in the Cayman Islands; principal executive offices located in Hong Kong); (iii) Etoiles Capital Group Co., Ltd. (Suspension Order: October 3, 2025; incorporated in the Cayman Islands; principal executive offices located in Hong Kong); (iv) Platinum Analytics Cayman Limited (Suspension Order: October 3, 2025; incorporated in the Cayman Islands; principal executive offices located in Singapore); (v) Pitanium Limited (Suspension Order: October 3, 2025; incorporated in the British Virgin Islands; principal executive offices located in Hong Kong); (vi) Empro Group Inc. (Suspension Order: October 8, 2025; incorporated in the Cayman Islands; principal executive offices located in Malaysia); (vii) NusaTrip Incorporated (Suspension Order: October 8, 2025; incorporated in Nevada; principal executive offices located in Indonesia); (viii) Premium Catering (Holdings) Limited (Suspension Order: October 16, 2025; incorporated in the Cayman Islands; principal executive offices located in Singapore); (ix) Robot Consulting Co., Ltd (Suspension Order: October 22, 2025; incorporated and headquartered in Japan); (x) Charming Medical Limited (Suspension Order: November 11, 2025; incorporated in the British Virgin Islands; headquartered in Hong Kong); and (xii) MaxsMaking Inc. (Suspension Order: November 14, 2025; incorporated in the British Virgin Islands; headquartered in Shanghai, China).
5 https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-5100-series
6 https://listingcenter.nasdaq.com/assets/rulebook/nasdaq/filings/SR-NASDAQ-2025-104.pdf
7 https://www.sec.gov/files/rules/sro/nasdaq/2025/34-104450.pdf
8 Id.
9 https://www.sec.gov/files/rules/sro/nasdaq/2025/34-104456.pdf
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