Nasdaq has been on a roll for the last six plus months, submitting proposed rule changes to the SEC focused on tightening listing standards and purging the exchange of stocks that maybe shouldn’t be listed on an exchange anymore, or ever have been listed in the first place. In the latest filing with this theme, the exchange proposes to adopt IM-5101-4, “which will provide Nasdaq with the authority to delist a security where the Commission has previously suspended trading and Nasdaq determines it appropriate and in the public interest to do so.” The SEC has posted a notice for public comment. The background in the notice provides some context:
Nasdaq has recently observed problematic or unusual trading in certain listed companies, apparently effectuated through recommendations made to investors by unknown persons via social media to purchase, hold, and/or sell the securities. The Commission has expressed concern about this activity, and in some cases suspended trading in the securities, stating 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.
Nasdaq does not currently have authority to delist the securities of a company based on this type of third-party misconduct but believes that the ability for third parties to manipulate a security’s price can indicate that the security does not have sufficient liquidity, and the issuing company does not have sufficient market interest, for listing to be appropriate. Nasdaq therefore proposes to adopt new IM-5101-4 to provide additional authority to exercise discretion to delist a company from Nasdaq based on the potential for one or more third parties to engage in misconduct impacting a company’s securities where the SEC has implemented a temporary trading suspension.
The new authority is narrow — it only applies if the SEC has issued a suspension under Section 12(k). And even in those limited cases, Nasdaq will exercise case-by-case discretion to delist based on whether the listed securities may be susceptible to manipulation, assessed based on a laundry list of factors:
– Where the company is located, whether a person or entity exercises substantial influence over the company and, if so, where that person or entity is located
– Whether the public float, share distribution and trading patterns raise liquidity concerns
– Social media activity designed to influence price and demand
– Whether material announcements explain recent trading activity
– Whether the company has recently issued securities
– Concerns about the company’s auditors, underwriters, law firms, brokers, clearing firms, or other professional service providers
– The experience of the company’s management and board
– Any FINRA or SEC referrals
– The existence of a recent going concern audit opinion
– “Other factors” that raise concerns about management, the board, shareholders or advisors
– Other material information
If this list looks familiar, these are based on the qualitative factors Nasdaq considers (from IM-5101-3) to assess whether the company’s stock is susceptible to manipulative trading by unaffiliated third parties when determining whether to apply its new limited discretion to deny initial listing, even where the company meets all the initial listing requirements.
Now, I’m assuming that the majority of companies with these trading suspensions have serious and ongoing problems, and delisting makes sense. But keep in mind that the SEC’s trading suspensions are usually for up to 10 trading days (although there are implications thereafter), while the delisting decision is not temporary. And while some of the factors listed above seem to get to the likelihood that people directly involved with the company might be engaging in the manipulative misconduct, Nasdaq clarifies that the actual manipulative misconduct that triggers the suspension and delisting discretion in the first place might be by completely unaffiliated third parties:
Nasdaq Staff may use this authority even where the problematic or unusual trading appears to be driven by third parties with no known connection to the company, and even where Nasdaq Staff cannot determine whether the company or any associated individual was involved, if Nasdaq determines it is appropriate and in the public interest to do so.
“Concerns related to the company’s advisors” is now a risk factor for both initial and continued listing. Is prior involvement with a company that had problematic trading activity now like the “black spot” from pirate lore? Micro-caps, when vetting potential service providers, look beyond regulatory issues and suss out whether they’ve been involved with securities with problematic trading activity. Service providers, do the same when vetting potential clients. (Maybe diligence their other service providers.)
A little over a year ago, NYSE announced plans to launch NYSE Texas, a fully electronic equities exchange, headquartered in Dallas, formed by reincorporating and renaming NYSE Chicago, which has been operating for almost a year now. This Winston blog suggests that listings are most suitable for dual-listed issuers, noting NYSE Texas’s listing rules exempt companies already listed on NYSE or Nasdaq from many of its requirements, and explains what is needed for listing. The exchange provides an example of the required Original Listing Application for reference, but says that issuers seeking a dual listing should contact NYSE to guide them through the review and application process. NYSE provides a list of securities newly listed (63 companies) or dual-listed (103 companies) on NYSE Texas.
Meanwhile, Nasdaq has followed suit. Yesterday, Nasdaq officially launched the Nasdaq Texas exchange. Nasdaq Texas was recently established by converting Nasdaq BX, Inc. to a Texas LLC and renaming it, after which it filed for and received approval to remove the exchange’s old listing standards and adopt new listing standards that are substantially similar to the rules that pertain to the Nasdaq Global Market. Initially, Nasdaq Texas is only home to dually listed companies, but it intends to transition to a primary listing exchange in the future. There’s a special listing application for companies seeking to dual-list, and Form 8-A filings have been starting to appear on EDGAR in the last few days. Nasdaq highlights these limited requirements and financial incentives:
Requirements:
– Be listed on a U.S. national exchange (Nasdaq or NYSE)
– Meet Nasdaq Global Market standards (e.g., $4+ stock price, financial & governance criteria)
– SEC-registered equity security
– Texas affiliation encouraged
Cost & Incentives:
– $0 application fee and $0 annual listing fee for the first year (pending SEC approval) – $30,000 credit toward Nasdaq IR & advisory services (pending SEC approval). – No added compliance burden or trading fragmentation – Unified liquidity (no new ticker) – Full Nasdaq platform access
While it seems like a relatively easy lift, I’m curious what benefits dual-listed companies have seen so far and whether the juice is worth the squeeze. A number of recognizable names are dual-listed or dual-listing, so clearly, some large-cap companies decided it would be worthwhile.
The NYSE has sent its annual compliance guidance to NYSE-listed companies to remind them of their obligations on a variety of topics and summarize developments since last year. Liz has shared some reminders from the letter on the Proxy Season Blog and on The Advisors’ Blog on CompensationStandards.com that I wanted to highlight here for readers who may have missed those — since presumably NYSE has identified these as commonly overlooked requirements. Here are two:
– [T]he Timely Alert/Material News policy also applies in connection with the verbal release of material news during the course of a management presentation, investor call, or investor conference. The fact that any such presentation is conducted in compliance with Regulation FD does not mean that the listed company is exempt from compliance with the Timely Alert/Material News policy in connection with any material news provided in the course of the presentation.
– A listed company is required to file a SLAP to seek authorization from the Exchange for a variety of corporate events, including: Issuance (or reserve for issuance) of additional shares of a listed security; [OR] Issuance (or reserve for issuance) of additional shares of a listed security that are issuable upon conversion or exercise of another security, whether or not the convertible security is listed on the Exchange […] No additional shares of a listed security, or any security convertible into the listed security, may be issued until the Exchange has authorized a SLAP. Such authorization is required prior to issuance, regardless of whether the security is to be registered with the SEC, including if conversion is not possible until a future date. The Exchange requests at least two weeks to review and authorize all SLAPs. It is recommended that a SLAP be submitted electronically through Listing Manager as soon as a listed company’s board approves a transaction.
As Liz noted, NYSE has highlighted SLAPs for at least two years running on the letter’s front page, and this requirement tends to catch some folks by surprise in the context of equity plans. Possibly because, unlike NYSE, Nasdaq only requires the submission of a Listing of Additional Shares when establishing or materially amending an equity plan without shareholder approval (i.e., an inducement plan) under Rule 5250(e)(2).
Here’s another sleeper issue from the annual letter (at least I hadn’t focused on this yet). And while it’s in NYSE’s annual letter, this issue is relevant across exchanges, and particularly relevant now, given the prior blog on yesterday’s launch of Nasdaq Texas.
With the SEC’s transition to EDGAR Next, listed companies must provide delegation on EDGAR Next for the applicable Exchange Account in advance of any Form 8-A filing […]
Such delegation is needed and required for the Exchange to submit its certification on behalf of the company’s EDGAR account. In addition, delegation must also be provided if there are any guarantors associated with the issuer’s Form 8-A filing.
You may not file a lot of Form 8-As if you don’t do many IPOs or exchange-listed debt or preferred stock offerings. But they’ve also been filed by companies dual-listing their equity on NYSE Texas or Nasdaq Texas. The certification is a simple letter from the exchange to Corp Fin confirming that it received a copy of the issuer’s Form 8-A12(b) and has approved the related securities for listing.
In addition to implications for disclosure outside the financial statements — including risk factors, MD&A, non-GAAP and legal proceedings — there are also potential financial statement implications of the SCOTUS decision in Learning Resources v. Trump. This KPMG alert highlights one time-sensitive one: that the SCOTUS ruling is a subsequent event evaluated under ASC 855 for companies that have imported goods that were subjected to IEEPA tariffs and had not yet issued financial statements for a closed fiscal period by February 20.
ASC 855 requires companies to evaluate events that occur after the balance sheet date but before financial statements are issued (or available to be issued) to determine whether those events require recognition or disclosure.
ASC 855 also distinguishes between two categories of subsequent events:
Recognized (Type 1) subsequent events provide additional evidence of conditions that existed at the balance sheet date and require adjustment to the financial statements.
Nonrecognized (Type 2) subsequent events relate to conditions that arose after the balance sheet date and do not require adjustment, but disclosure is required if the event is material and omission would be misleading.
Determining whether a subsequent event is Type 1 or Type 2 requires judgment.
We believe it is acceptable to treat the Supreme Court’s decision as a nonrecognized (Type 2) subsequent event in financial statements that have not yet been issued as of February 20, 2026.
That means companies should disclose the decision and its implications as a subsequent event if the decision “is expected to have a material effect on the financial statements when recognized, or not disclosing it would otherwise result in the omission of material information.”
Such disclosures may address, for example, the potential effect on existing and future tariff exposure, supply chain arrangements, liquidity or ongoing or anticipated legal proceedings. Any estimate of financial effects is based on information known as of the date the financial statements are issued (or available to be issued), and companies should avoid speculative or overly forward‑looking statements. As with all subsequent events analyses, conclusions should be grounded in company‑specific facts and circumstances.
Companies should also consider whether related disclosures are required under other US GAAP topics, such as ASC 275 on risks and uncertainties, ASC 205-40 on going concern or ASC 450 on contingencies.
It’s now to the point that I’m having a hard time keeping the Rule 14a-8 litigation straight. Liz shared last week that a trio of proponent lawsuits had sprung up, and two of those three cases had settled by the end of the week. The third case concerning a political spending proposal is ongoing. And Law Prof Ann Lipton recently shared an update on LinkedIn. A hearing was scheduled for yesterday, and the Court ordered the company to send a witness to testify about its record collection and retrieval capabilities for compiling information regarding political contributions. It also “urged the parties to work together to draft a compromise shareholder proposal” that satisfies the proponent’s request while alleviating burdens on the company.
In the meantime, two new proponent lawsuits were filed this week. One involves a proposal submitted to an insurance company by As You Sow and seeks “a report to assess whether pursuing claims for compensation against parties responsible for climate change could reduce losses, benefit shareholders, and help preserve affordable homeowners insurance.” The company plans to exclude the proposal for ordinary business and micromanagement reasons under Rule 14a-8(i)(7). Another involves a proposal submitted to a retailer by the Comptroller of the State of New York requesting assessment of deforestation risks in the company’s private-label brands. Weeks earlier, the NYS Comptroller had written a letter to 10 shareholder proposal recipients calling for “good faith” engagement.
One of these lawsuits appears to have been filed before the incoming Rule 14a-8(j) notice was posted to the website or the Corp Fin Staff issued a response. (At least, I can’t find either.) While the SEC Staff’s response letter in the other lawsuit was from January 15. We’ll continue to track the more granular on the Proxy Season Blog and in our “Proxy Season” Practice Area.
The latest issue of The Corporate Executive newsletter has been sent to the printer. It is also available now online to members of TheCorporateCounsel.net who subscribe to the electronic format. The issue includes the following articles:
– Revisiting the Tipping Point: The State of Play for Climate & ESG Disclosures
– An Ode to Shareholder Engagement: Turning the Page in 2026
Email info@ccrcorp.com or call 1.800.737.1271 to subscribe to this essential resource!
It was easy for me to ignore all the news about the prediction markets for quite a while. No securities are involved, and I’m a securities lawyer. So…I don’t need to worry about this. Right? I wish that were true. But as Liz shared last week, savvy securities lawyers are thinking about whether and how their codes of conduct and insider trading policies should address prediction market insider trading.
Why? As Liz noted, Kalshi recently announced that it has been actively investigating potential insider trading activity on its platform and shared details of closed cases. And last week, the CFTC’s Division of Enforcement issued an advisory on these two cases. The press release says (case citations removed):
While Kalshi’s internal enforcement program handled these matters, under the [Commodity Exchange Act], the Commission has full authority to police illegal trading practices occurring on any [Designated Contract Market], including those described above related to prediction markets. Without limitation, these practices include:
– Misappropriation of confidential information in breach of a pre-existing duty of trust and confidence to the source of the information (commonly known as “insider trading”) pursuant to Section 6(c)(1) of the Act, and Regulation 180.1(a)(1) and (3).
– Pre-arranged, noncompetitive trading and wash sales, under Section 4c(a)(1) and (2)(A) of the Act, and Regulation 1.38(a).
– Other prohibited trading practices including disruptive trading pursuant to Section 4c(a)(5).
– Fraud and manipulation under various sections of the Act.
As this Braeden Anderson post explains, “We are accustomed to discussing insider trading in the securities context, grounded in Section 10(b) of the Exchange Act and Rule 10b-5. But the CFTC has long had parallel authority under Section 6(c)(1) and Regulation 180.1 to pursue fraud and misappropriation in commodities and derivatives markets.” Gibson Dunn notes that many public companies already prohibit employees from insider trading on prediction markets — that is, to the extent their codes of conduct forbid employees from using confidential information obtained from their employment for personal gain or engaging in conflicts of interest.
But currently, those codes — and employee training — may not further explain that prediction market trading using confidential information obtained from an employer would violate both these code provisions and federal law. (There’s a good chance most employees don’t know this?) And it wouldn’t be the greatest thing in the world if the news was suddently reporting that one of your employees was trading on an outcome based on confidential company information or an event they controlled or influenced. Read on (in today’s next blog) for recommendations that public companies might want to consider.
OK. Prediction market trading by employees can violate codes of conduct and federal law (state law, maybe, too!) if based on confidential information, and this could mean reputational damage for companies. So what should public companies do? After a deep dive on prediction markets (really helpful if you’ve been burying your head in the sand, as I have), this MoFo alert has detailed suggestions.
Because prediction markets do not involve “securities,” a company’s insider trading policy, surprisingly, may not be the best primary policy to address the risks of insider trading on prediction markets. Moreover, insider trading policies often apply to directors, officers, and certain employees that can be expected to receive traditional material non-public information, but the wide-ranging nature of prediction markets could extend to scenarios where lower-level employees could potentially misuse information.
A company’s code of conduct or ethics (the “Code”) generally applies enterprise-wide and may be a better source to primarily address prediction market activity more broadly. For instance, a Code could be revised to:
– Reinforce that employees may not use confidential information for personal gain in any form;
– Clarify that wagering, betting, trading, or engaging in any transactions based on inside information is prohibited;
– Capture misconduct that may not fall squarely within federal securities law but that still violates fiduciary duties or company policy.
[M]any insider trading policies narrowly prohibit trading in a company’s own securities and, in some cases, derivatives or hedging instruments tied to company securities. Fewer policies explicitly address event-based contracts referencing the company, markets that do not require trading in the company’s stock, or trading on platforms outside of traditional broker-dealers and exchanges.
As prediction markets expand, companies should consider clarifying that trading on the basis of MNPI is prohibited regardless of the form of the instrument used to monetize the information. To the extent a company’s Code is updated as described above, companies should consider expressly cross-referencing relevant provisions of the Code in their insider trading policy. In addition, while prediction market activity could conceivably be addressed in a Rule 10b5-1 trading plan, companies may not wish to be viewed as approving or even encouraging employee use of prediction markets. Further, the event-driven nature of prediction market contracts could also make Rule 10b5-1 coverage unworkable.
The alert also suggests that companies could consider requiring employees to disclose any prediction market or online wagering accounts — or prohibit such accounts altogether (especially in highly regulated industries). Plus annual or quarterly certifications that employees have not engaged in prohibited trades in prediction contracts might “reinforce expectations and provide a record of compliance efforts.” As always, training is your best friend. Make sure your employees know what your policies permit and prohibit and what trading activity is illegal.
While we’re on the subject, it may also be worth pointing out that the ‘prediction markets universe’ and the ‘securities markets universe’ are starting to collide. (Hey, it’s the plot of every sci-fi or superhero movie in the last 10 years!) I say that because Nasdaq MRX has asked the SEC for approval to list and trade prediction market options (Outcome-Related Options or “OROs”) on the Nasdaq-100 Index. (Cboe is considering something similar.)
There’s also the fact that NYSE announced a partnership and $2 billion investment in Polymarket last October. What this means for us securities lawyers, I don’t know. But these are things that are happening.
On Friday, the SEC adopted amendments to its rules and forms to conform them to the Holding Foreign Insiders Accountable Act (HFIAA), which requires directors and officers of foreign private issuers (FPIs) with a class of equity securities registered under Section 12 of the Exchange Act to report their holdings of and transactions in the issuer’s equity securities (electronically and in English) beginning March 18, 2026.
As expected, the SEC amended Rule 3a12-3(b), which currently exempts FPIs from all of Section 16, to limit the exemption to Section 16(b), the short-swing profit rule, and Section 16(c), the short-sale prohibition. The SEC also (1) amended Rule 16a-2, which identifies the persons and transactions subject to Section 16, to provide that ten percent owners of FPIs are not subject to Section 16(a), (2) amended General Instruction 1 to Form 3, which identifies the persons required to file Form 3, to include directors and officers of FPIs and exclude ten percent owners, and (3) amended Forms 3, 4 and 5 to allow Box 1 to include a postal code or country code rather than a zip code and add a new box following the “Issuer Name” box to allow inclusion of a foreign trading symbol. A list of country codes is available on the SEC’s website.
While Section 16 reporting persons will continue to be required to enter the issuer’s name and ticker or trading symbol in Box 3 of Form 3 and Box 2 of Forms 4 and 5, a new optional field (Box 3a. of Form 3 and Box 2a. of Forms 4 and 5) allows insiders of FPIs with securities trading in both US and non-US markets to provide a second trading symbol if they hold shares that are traded in both markets. Where securities have only a foreign trading symbol, insiders may either enter the foreign trading symbol in the first mandatory box (if space allows) or enter “none” in that box and enter the foreign trading symbol in the new second box. While the SEC has not yet posted updated versions of Forms 3, 4 or 5, we have updated our model Form 3 for directors and officers of FPIs to report their initial holdings as of March 18, 2026 (see Model Form 7a in the online version of the Forms & Filings Handbook) to reflect the amendments to Form 3.
The SEC clarified that language in Rule 16a-3(g)(1) and (f)(1) and the Instructions to Forms 4 and 5 establishing reporting requirements for transactions exempted from Section 16(b) should not be read to exempt directors and officers of FPIs from reporting transactions otherwise required by Section 16(a) based on the inapplicability of Section 16(b) to FPIs. The release also notes that directors and officers of FPIs should use the transaction codes listed in the Instructions for Forms 4 and 5, including those applicable to transactions qualifying for an exemption from Section 16(b), even though directors and officers of FPIs are not subject to Section 16(b).
Recognizing that some FPIs have a two-tier board structure — with a supervisory (non-management) board and a management board — the SEC also noted that irrespective of instructions in Form 20-F specifying that for some purposes the term “board of directors” refers only to the supervisory or non-management board, Section 3(a)(7) sets forth the definition of a “director” for purposes of the Section 16(a), and whether a person is a “director” for purposes of Section 16(a) should be determined using that definition.
Chair Atkins issued a statement indicating that the SEC is still evaluating whether to exercise the authority granted by the HFIAA to exempt persons, securities, or transactions from Section 16(a) because foreign laws already impose substantially similar requirements.
Commissioner Mark Uyeda issued a separate statement offering his views regarding why the HFIAA should not be construed to apply to ten percent owners.
We’re posting memos in our “Foreign Private Issuers” Practice Area, but for all things Section 16, you needSection16.net, where you can electronically access the “bibles” of Section 16 (Romeo & Dye’s Section 16 Forms & Filings Handbook, including the model Form 3 for D&Os of FPIs noted above, and Romeo & Dye’s Section 16 Treatise and Reporting Guide), follow and subscribe to Alan’s blog on Section 16 developments and practical tidbits, access the Q&A forum moderated by Alan, join Alan’s annual webcast and more. And for a cost-effective way to make Section 16 filings, check out the Romeo & Dye Section 16 Filer. If you are not a member of Section16.net, reach out to info@ccrcorp.com or call 1.800.737.1271 to subscribe to this essential resource.
