NASDAQ Listing Requirements and Disclosures
Posted by Laura Anthony, Esq. on June 16, 2016
NASDAQ has several listing applications depending on the circumstances of the listing sought. There are twelve different listing applications varying from an application where there has been a change of control, to switching from another exchange or other U.S. market such as the OTC Markets, to spin-offs and of course an IPO. Each listing application is approximately 7 pages in length and requests detailed basic information about the company such as address, contact and billing information, securities attorney and auditor information, transfer agent and officers and directors and information on the specific securities being listed including type, par value and cusip number.
A NASDAQ application also requires disclosure and back up documents of inquiries, investigations, lawsuits, litigation, arbitrations, hearings and other legal and administrative proceedings involving the company, its officers or directors or ten percent (10%) or greater shareholders. Related to the company, the application requires disclosure of any proceedings in the prior 10 years (i) that were initiated by any regulatory civil or criminal agency; (ii) which are material to the company and were asserted under state or federal securities, banking, insurance, tax or bankruptcy laws; or (iii) which are material to the company and allege fraud, deceit or misrepresentation.
Related to officers, directors or ten percent (10%) or greater shareholders, the application requires disclosure of any proceedings within the prior 10 years (i) that were initiated by any regulatory civil or criminal agency; or (ii) which allege fraud, deceit or misrepresentation and requested damages in excess of $100,000.
Disclosure is required as to any and all matters that fall within the category requested, including where the inquiring party would not have jurisdiction to pursue a claim. For example, inquiries by FINRA’s Office of Fraud Detection and Market related to the trading activity and press releases, although usually benign, must be disclosed.
The application includes questions designed to ensure compliance with the seasoning rules. Moreover, all private offerings, including bridge financings and Regulation S offerings, that “are contemplated or have been consummated within the prior six months,” must be disclosed. A planned incomplete or busted offering may result in additional questions and accordingly, care should be given in launching private offerings prior to a planned listing.
Although NASDAQ has the right to request any supporting documents it deems relevant, certain supporting documents must be included with the application. The types of supporting documents vary depending on application type.
An application for an uplisting from an existing U.S. market, such as the OTC Markets, must include letters from 3 market makers confirming their agreement to make a market in the subject securities upon acceptance of a NASDAQ listing; (ii) any regulatory correspondence over the past 12 months; and (iii) shareholder confirmation documents.
Common follow-up questions from NASDAQ when reviewing an uplisting application include: (i) a request for a Broadridge share range analysis and NOBO list; (ii) a request for a certified shareholder list; (iii) questions related to the mitigation of any going concern opinions; (iv) a request for income statement and/or balance sheet projections for the next 12 months; (v) confirmation that all Sarbanes Oxley Section 302 and 906 certifications have been made; and (vi) confirmation that the auditors have reviewed all quarterly filings in accordance with SAS 100.