Over on Cooley’s CapitalXchange Blog, Liz recently posted about a Nasdaq proposal to amend Rules 5450 and 5550 to impose a $5 million minimum market cap requirement on companies listed on Nasdaq’s Global and Capital Markets. Here’s an excerpt from her blog with some details about the proposal:

Nasdaq has proposed a new continued listing standard for companies listed on its Global and Capital Markets tiers. The proposed rule, which would amend existing Rules 5450 and 5550, would require these companies to maintain a minimum Market Value of Listed Securities of at least $5 million.

Nasdaq believes that once the market identifies significant problems in a company by assigning a very low market value, that company is no longer appropriate for continued listing and trading on Nasdaq because challenges facing such companies, generally, are not temporary and may be so severe that the company is not likely to regain compliance within a compliance period and sustain compliance thereafter. In Nasdaq’s view, it is also more difficult for market makers to make markets in the securities of these nano-caps, and for there to be a fair and orderly market.

Nasdaq is also proposing an amendment to Rule 5810 that would suspend trading and immediately delist from Nasdaq the securities of companies that do not satisfy the proposed new market cap requirement for 30 consecutive business days. The staff’s delisting notice would inform the company that its securities are immediately suspended from trading and subject to delisting.

Companies would not have a cure period to regain compliance with the market cap standard or be entitled to any stay in effectiveness. A company would be permitted to appeal the delisting decision to the Hearings Panel, but its securities would generally trade on the over-the-counter market while the review is pending, rather than on the exchange, and the Hearings Panel would not be able to grant an exception to the continued listing standard.

The rule proposal would also tie the Hearings Panel’s hands pretty tightly – it could overturn a delisting decision only if it finds that Nasdaq got the math wrong and the company never actually failed to satisfy the minimum market cap requirement. Other matters, such as the company’s subsequently regaining compliance with the requirement, could not be considered by the Panel.

This hasn’t hit the SEC’s website yet, but keep an eye out for it. Also, Liz’s blog covers a bunch of other recent Nasdaq rulemaking, so be sure to check out the whole thing.

– John Jenkins