Overview

On Dec. 12, 2025, Nasdaq filed with the Securities and Exchange Commission (SEC) a proposed rule to provide Nasdaq with limited discretion to deny initial listing to certain companies, even where the company meets all stated listing requirements. Nasdaq believes this additional authority is necessary to address situations where characteristics of a pending applicant suggest that its securities may be susceptible to manipulation, based on concerns identified in recent trading of companies with similar characteristics or based on considerations related to the company’s advisors.

Background and Purpose

In the filing, Nasdaq states that it has seen problematic or unusual trading in certain listed companies, including cases in which the SEC has imposed temporary trading suspensions under Section 12(k) of the Exchange Act. Those suspensions were generally based on concerns that recommendations by unknown persons through social media were designed to artificially inflate the price and volume of the securities, often in securities that had been listed for less than one year.

Nasdaq explains that its current listing requirements and existing discretionary authority focus on the characteristics and conduct of the company itself and persons associated with it. These provisions do not currently allow Nasdaq to deny listing based on the potential for unaffiliated third parties to engage in misconduct impacting a company’s securities or on trading patterns of other companies with similar characteristics or advisors, so Nasdaq believes additional authority is required.

Proposed New Authority

To address these concerns, Nasdaq’s proposed rule will provide Nasdaq with the authority to deny initial listing to a company based on factors that make the company’s securities susceptible to manipulation.

The basis for use of this authority can include considerations related to the company’s advisors or the impact of foreign laws on the potential recourse available to U.S. regulators or investors when misconduct occurs. Nasdaq believes this discretion will allow it to better address situations where comparable companies have experienced problematic or unusual trading.

Non-Exclusive Factors Nasdaq Will Consider

The proposed rule sets out a non‑exclusive list of factors Nasdaq will consider when determining whether to apply this discretion:

Location, Legal Environment, and Controlling Shareholder

• Where the company is located, including: availability of legal remedies to U.S. shareholders; existence of blocking statutes, data privacy laws, or other foreign laws that may impede regulatory enforcement; the ability to conduct comprehensive due diligence; and the transparency of regulators in that jurisdiction.
• Whether a person or entity exercises substantial influence over the company and, if so, where that person or entity is located, evaluated under the same considerations as above.

Public Float and Share Distribution

• Whether the expected public float and dissemination of share distribution, based on a review of underwriter, broker, and clearing allocations and prior transactions involving those service providers at the time of the IPO and post‑offering, raises concerns about adequate liquidity and potential concentration.

Advisors and Their History

• Whether there are issues concerning the company’s advisors, based on factors including whether the advisor has been reviewed by applicable regulators and the results of those reviews.
• If an advisor is a new entity, whether its principals were involved with other firms with a regulatory history.
• Whether any of the company’s advisors were involved in prior transactions where the securities became subject to a pattern of concerning or volatile trading.

Management, Board, and Regulatory Referrals

• Whether the company’s management and board have experience or familiarity with U.S. public company requirements, including regulatory and reporting requirements under Nasdaq rules and federal securities laws.
• Whether there are any FINRA, SEC, or other regulatory referrals related to the company or its advisors and, if applicable, the results of those referrals.

Financial Condition and Integrity Concerns

• Whether the company currently has, or recently has had, a going concern audit opinion and, if so, the company’s plan to continue as a going concern.
• Whether there are other factors that raise concerns about the integrity of the company’s board, management, significant shareholders, or advisors.

Nasdaq stated that this list is non‑exclusive and that other relevant factors can be considered where they raise similar concerns.

Denial Process and Disclosure Obligations

When Nasdaq determines to deny initial listing based on this authority, Nasdaq staff will issue a written determination describing the basis for its decision. Within four business days of the date of staff’s written determination, the company must make a public announcement, in a press release or other Regulation FD compliant manner, disclosing receipt of the determination, the rule(s) upon which it is based, and each specific basis and concern identified by Nasdaq.

A company whose application is denied may seek review by a hearings panel within seven calendar days.

Timeline of the Proposed Rule

Nasdaq states that the proposed rule has become effective, and that it intends to apply the new authority to all companies currently in the application process. However, the proposed rule change states that it will not be operative for 30 days after the date of the filing, unless the SEC designates a shorter timeline if consistent with the protection of investors and the public interest. Nasdaq has requested that the SEC waive the 30-day operative delay so that Nasdaq can immediately implement the proposed changes. The SEC may temporarily suspend the rule within 60 days of the filing of the proposed rule, if it appears to the SEC that the action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Exchange Act.

Important Considerations 

The proposed rule significantly increases the importance of “up front” listing strategy, relationship diligence, and disclosure for companies—particularly smaller or foreign issuers—seeking to list on Nasdaq. The proposed rule will permit Nasdaq to deny an initial listing even when all objective financial and quantitative standards are met, based on such factors as jurisdictional barriers to legal enforcement, concentrated expected public float, and patterns observed in similarly situated companies or shared advisors. It also puts a premium on choosing advisors, such as auditors, underwriters, and law firms with strong regulatory records and industry reputation.

The new discretionary standard will also introduce real execution and timing risk that companies will need to plan around. That possibility makes it essential to build a record addressing Nasdaq’s list of factors, including board and management familiarity with U.S. public company requirements, robust going concern planning, float and distribution analysis, and clear explanations of any connections to higher risk jurisdictions or advisors, so that the company is better positioned both to avoid a denial and to challenge one if it occurs. The proposed rule also increases the value of early dialogue with Nasdaq and the company’s advisors regarding the company’s risk profile and allocation distribution.