Important information if you’ve registered for our “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” – Be on the lookout for an email from “no-reply@events.ringcentral.com (our event platform). This email confirms your registration and contains your unique link to access the Conferences virtually, whether you are using that in real-time as a virtual attendee, or as an on-site resource for in-person attendance. (Note, if you’ve never attended a RingCentral event before, you will also receive a second email confirming that a RingCentral account has been created for you.)
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What can you buy for 10 cents these days? A single-use grocery bag? Maybe a single Jolly Rancher? What about a share of a listed company’s stock? Maybe. But Nasdaq is trying to change that in what appears to be a broader effort to do some listed company clean-up.
Last week, the SEC posted this notice and request for comment for proposed changes to Nasdaq’s minimum bid price rules. The combined effect of these proposed changes is to accelerate the delisting determination and trading suspension of a security if its bid price quickly declines from above $1.00 to below $0.10. Here’s how:
Delisitng Determination: Under the current rule, if a security has a closing bid price of $0.10 or less for 10 consecutive trading days, Nasdaq issues an immediate delisting determination (notwithstanding any otherwise available compliance period) only AFTER a company’s security is already non-compliant with the $1.00 minimum bid price requirement (which happens once the security has traded below $1.00 for 30 consecutive days). With the proposed changes, Nasdaq rules would require an immediate delisting determination (and ineligibility for any compliance periods) when a security does not maintain a closing bid price of greater than $0.10 for 10 consecutive trading days whether or not the company is first non-compliant with the $1.00 bid price requirement for 30 days.
Trading Suspension: Generally, a timely request for a hearing will stay the suspension and delisting of a security pending the issuance of a written panel decision. Nasdaq proposes to except securities that trade at less than $0.10 for 10 consecutive trading days from this general rule so that a company that is suspended under the proposed rule could appeal the delisting determination to a Hearings Panel, but its securities would trade in the over-the-counter (OTC) market while that appeal is pending. The proposal also clarifies that compliance is achieved once the security trades at least $1.00 for a minimum of 10 consecutive business days, unless Staff exercises its discretion to extend the 10 business day period pursuant to its authority to do so.
Nasdaq says these proposals are meant to more quickly boot securities from the exchange in situations that are “indicative of deep financial or operational distress within such company, and that the challenges facing such companies, generally, are not temporary and may be so severe that the company is not likely to regain compliance.”
The SEC is seeking comments on the proposal, which Nasdaq proposes to be operative 45 days following Commission approval.
Last week, Nasdaq posted twoother proposed rule changes that would modify certain initial and continued listing requirements. As detailed by this Sheppard Mullin blog, the proposals reflect the following key changes:
– Minimum Market Value of Publicly Held Shares: A new $15 million minimum public float is proposed for companies seeking to list under the net income standard.
– Accelerated Suspension & Delisting Process: Companies falling below a $5 million market value of listed securities — while also failing other compliance criteria — will be subject to swifter suspension and delisting.
– Special Rules for China-Based Companies: Companies principally operating in China would now face a $25 million minimum initial public offering (IPO) proceeds threshold for new listings.
Here is an excerpt from Nasdaq’s submission to the SEC explaining the reasoning for the first two proposed changes detailed above:
Minimum Market Value of Publicly Held Shares
Nasdaq Listing Rules require a company to have a minimum Market Value of Unrestricted Publicly Held Shares. For initial listing on the Nasdaq Global Market, a company must have a minimum MVUPHS of $8 million under the Income Standard, $18 million under the Equity Standard, and $20 million under either the Market Value or Total Assets/Total Revenue Standards. For initial listing on the Nasdaq Capital Market, a company must have a minimum MVUPHS of $5 million under the Net Income Standard, and $15 million under either the Equity or Market Value of Listed Securities Standards. Unrestricted Publicly Held Shares are shares that are not held by an officer, director or 10% shareholder of the company and which are not subject to resale restrictions of any kind . . .
Nasdaq recently modified the liquidity requirements for initial listing such that shares registered for resale are no longer counted as Unrestricted Publicly Held Shares. As a result, a newly listing company listing in connection with an initial public offering must meet the MVUPHS based on shares being sold in the offering . . .
Following this change, Nasdaq Staff has observed an increase in the number of companies applying for listing based on Nasdaq’s net income requirement, which requires a lower MVUPHS than the other standards. As noted above, Nasdaq Staff has observed problematic trading in companies with low public floats and liquidity, and Nasdaq is concerned that companies initially listing with just $5 million or $8 million MVUPHS on the Nasdaq Capital or Global Markets, respectively, may not trade in a manner supportive of price discovery . . .
Accelerated Suspension & Delisting Process
Nasdaq believes that once the market identifies significant problems in a company otherwise deficient in the listing standards by assigning a very low market value, that company is no longer appropriate for continued 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 the prescribed compliance period and sustain compliance thereafter . . .
While Nasdaq has taken action to enhance its listing standards and more quickly delist certain companies that have repeated failures to maintain compliance with those standards, Nasdaq now proposes further enhancing investor protections by providing for suspension from Nasdaq trading and immediate delisting (rather than providing a compliance period) of any company that becomes non-compliant with a numeric listing requirement, including the bid price, market value of public float, equity, income and total assets/revenue requirements, and that has a market value of listed securities of less than $5 million.
For more, check out this Q&A with John Zecca, Nasdaq’s Executive Vice President and Global Chief Legal, Risk, & Regulatory Officer.
These proposed changes are procedurally behind the proposal to accelerate the delisting and suspension of securities trading below 10 cents and the proposal to reduce initial listing requirements for companies formed by a combination with an OTC-traded SPAC since those have already been noticed for comment by the SEC. The SEC will also have to post notices and solicit comments on these proposals on its Self-Regulatory Organization Rulemaking page before approval by the Commission.
As you can see, today is all about Nasdaq. But while my prior two blogs address the tightening of listing standards, Nasdaq also proposed changes that would make it easier to list securities in connection with a business combination with an OTC-listed SPAC. Here’s what I shared on Friday on DealLawyers.com:
Yesterday, the SEC posted this notice and request for comment for a proposed change to Nasdaq’s rules applicable to initial listings in connection with de-SPAC transactions involving OTC trading SPACs. The change would align the treatment of OTC trading SPACs with similarly situated exchange-listed SPACs.
– Nasdaq is proposing to modify the definition of a “Reverse Merger” in Listing Rule 5005(a)(39) to exclude the security of a special purpose acquisition company, as that term is defined in Item 1601(b) of Regulation S-K (“SPAC”) that is listing in connection with a de-SPAC transaction, as that term is defined in Item 1601(a) of Regulation S-K (“de-SPAC transaction”), upon effectiveness of a 1933 Securities Act registration statement (“Registration Statement”).
A company formed by reverse merger is eligible for initial listing only if it satisfies additional initial listing conditions, including that, immediately before the filing of the application, the combined entity traded for at least one year in the U.S. over-the-counter market, on another national securities exchange, or on a regulated foreign exchange and timely filed all required periodic financial reports, including at least one annual report. A company formed by the acquisition of an operating company by a “listed” SPAC is currently excluded from the definition of reverse merger — and these additional initial listing requirements.
Nasdaq points to the new disclosure requirements applicable to de-SPAC transactions. With those changes, Nasdaq believes a company listing on Nasdaq in connection with a de-SPAC transaction at the time of effectiveness of its registration statement should be excluded from the additional reverse merger requirements.
Nasdaq also proposes to exempt listing applications in connection with business combinations involving an OTC-trading SPAC from the ADV requirement that applies to securities that traded in the OTC market prior to the application.
– Nasdaq also proposes to modify Listing Rules 5315(e)(4), 5405(a)(4), and 5505(a)(5) (the “ADV Requirement”) to exclude the security of a company listing in connection with a de-SPAC transaction, upon effectiveness of a Registration Statement, from the minimum trading volume requirement applicable to newly listing companies that previously traded in the over-the-counter (“OTC”) market.
The SEC’s Spring 2025 Reg Flex Agenda was released yesterday, just in time to coincide with the arrival of meteorological fall, and crypto regulation and efforts to ease capital raising rank high on the agency’s agenda. Here’s where things stand on some of the potential SEC rules that we’ve been following:
I’ve got to say, this is probably the most issuer-friendly Reg Flex Agenda I’ve ever seen – and this excerpt from SEC Chairman Paul Atkins’ statement on the Agenda indicates that this is not an accident:
This regulatory agenda reflects that it is a new day at the Securities and Exchange Commission. The items on the agenda represent the Commission’s renewed focus on supporting innovation, capital formation, market efficiency, and investor protection.
Some of you may have noticed that despite all the recent activity at the SEC over executive comp disclosure, it’s not specifically called out in the Reg Flex Agenda. I don’t know for sure, but my guess is that proposed changes to those rules may be part of the “Rationalization of Disclosure Practices” agenda item – and that agenda item’s title suggests that there may be more areas of the public company disclosure regime that the SEC is thinking about revamping.
This Reg Flex Agenda is also one of the most ambitious I’ve seen, and in light of media reports indicating that the SEC is heading into another round of staff cuts, it will be interesting to see if the agency has the bandwidth to move forward on these initiatives in a timely manner.
Segment reporting is a perennial topic when it comes to Corp Fin’s review of SEC filings. So far in 2025, the Staff’s comments in this area have focused on ASU 2023-07, FASB’s revised segment disclosure reporting requirements which went into effect this year. This Maynard Nexsen memo reviews some of the significant recurring Staff comments on compliance with the new requirements. This excerpt discusses Staff comments challenging whether a registrant that reports a single segment actually has multiple reportable segments:
Single segment registrants: are you sure you don’t really have multiple segments?
Compliance with the Segment Reporting Standard requires an analysis of the registrant’s operating segments and reporting segments. Operating segments reflect how an entity manages its business (e.g., by products and services or geographically). Important aspects of an operating segment include that it has available financial information and its operating results are regularly reviewed by the CODM.
Each operating segment may become a reportable segment if it meets certain size thresholds included in the Segment Reporting Standard (e.g., 10% of combined segment revenues). Two or more operating segments also may be combined for this purpose if they are sufficiently similar in certain characteristics listed in the Segment Reporting Standard (e.g., nature of products and services, production processes or customers). Many registrants have determined that they operate only one reportable segment.
Registrants that have determined that they have a single reportable segment sometimes receive a comment from the staff challenging that determination. Historically, this has been one of the most frequent topics for comments on segment reporting. Occasionally the Staff will request to see the reports that the registrant provides to the CODM to understand how management evaluates segment performance. Responding to such comments requires a detailed analysis of the application of the Segment Reporting Standard, which analysis is fact-specific for each registrant.
The memo says that other areas that the Staff frequently comments upon include disclosures relating to reconciliation requirements, significant segment expenses and other segment items, and how the Chief Operating Decision Maker uses the segment performance measure. Staff comments have also focused on whether a segment performance measure is also a non-GAAP financial measure.
With the September 15th compliance date for EDGAR Next enrollment less than two weeks away, the EDGAR Business Office recently held the latest in its series of webinars offering guidance on the EDGAR Next enrollment process & addressing FAQs. The SEC recently announced that a recording of that webcast has been made available and provided links to a bunch of other EDGAR Next related resources available on the SEC’s website. Here’s the announcement in its entirety:
Compliance with EDGAR Next is required on Monday, September 15, 2025 in order to file on EDGAR. Enrollment will remain open through December 19, 2025, however, as of September 15, 2025, filers who have not enrolled or been granted access on Form ID on or after March 24, 2025 will be unable to file until they enroll.
For more information, visit the EDGAR Next page on SEC.gov. Assistance is also available at EDGARNext@sec.gov and by contacting Filer Support at 202-551-8900, option #2.
If you’re one of those folks who invariably pulled all-nighters during exam week (guilty) and are now in need of some additional pre-deadline guidance on how to get your EDGAR Next act together, check out this Husch Blackwell memo.
Kevin LaCroix recently blogged about the filing of what may be the first securities fraud lawsuit based on allegedly misleading disclosure about the business impact of the Trump administration’s tariff regime. This excerpt summarizes the complaint’s allegations:
On August 29, 2025, a plaintiff shareholder filed a securities class action lawsuit in the Eastern District of Michigan against Dow and certain of its executives. The complaint purports to be filed on behalf of a class of investors who purchased the company’s securities between January 30, 2025, and July 23, 2025.
The complaint alleges that during the class period the defendants failed to disclose that “(i) Dow’s ability to mitigate macroeconomic and tariff-related headwinds, as well as to maintain the financial flexibility needed to support its lucrative dividend, was overstated; (ii) the true scope and severity of the foregoing headwinds’ negative impacts on Dow’s business and financial condition was understated, particularly with respect to competitive and pricing pressures, softening global sales and demand for the Company’s products, and an oversupply of products in the Company’s global markets; and (iii) as a result, Defendants’ public statements were materially false and misleading at all relevant times.”
The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The plaintiffs seek to recover damages on behalf of the plaintiff class.
I’m sure it won’t come as a shock to readers that Kevin thinks this may be the first of many tariff-related securities lawsuits. President Trump’s unpredictable and ever-evolving approach toward tariffs creates a situation where companies may find themselves facing some unpleasant surprises during any given quarter. Kevin points out that companies should expect plaintiffs to scour prior company statements for optimistic tariff-related comments that they can fashion into allegations of securities fraud.
Our SEC All-Stars panel will have critical insights about tariff-related disclosures during our upcoming Proxy Disclosure & Executive Compensation Conferences to be held in Las Vegas and virtually on October 21-22. Don’t miss out! You can sign up online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.
Over on the Cooley’s “Governance Beat,” Broc recently blogged about how analysts and investors use AI to review corporate earnings releases. Here’s a selection of some of the uses he identified:
Sentiment analysis: AI analyzes the tone of management’s language in earnings calls, MD&A sections and press releases. AI measures optimism, uncertainty, hedging, confidence or risk language. It can help predict stock movements based on management sentiment shifts.
Keyword and phrase tracking: Investors use AI to flag specific words or disclosures that signal risk or opportunity. For example, the terms “supply chain disruption,” “macroeconomic uncertainty” or “beat guidance” might be flagged.
Trend and anomaly detection: AI compares current earnings disclosures against past filings or peer disclosures. AI helps to identify outliers in margins, CapEx trends or unexpected shifts in accounting policies.
Financial metric extraction: AI automates the pulling of KPIs (e.g., EPS, EBITDA and revenue growth) from text, tables and footnotes. One benefit is quicker ingestion into models and dashboards without manual review.
In June, Dave blogged about how companies are responding to AI-induced pressure when it comes to the language they use in their MD&A discussions. Based on Broc’s blog, it looks like that the same dynamic is likely at work when it comes to drafting earnings releases.
It isn’t just investors and analysts that are increasingly leaning on AI tools – a recent CLS Blue Sky blog discusses the current and potential uses of AI by proxy advisors. It points out that proxy advisors currently use AI tools for preliminary activities like information extraction, classification, and scoring. However, the blog says that the use of AI to help proxy advisors formulate voting recommendations may be right around the corner. This excerpt says that using AI for this purpose involves significant risks, but also offers significant potential advantages:
Such use entails serious risks – including the black-box nature of decision-making processes, the acceleration of unjustified convergence within a single proxy adviser’s recommendations as well as divergence across different proxy advisers, and the institutional embedding of conflicts of interest through training on historical data – which could exacerbate opacity, undue influence, and conflicts of interest. Moreover, AI obscures who is involved in making judgments and where accountability lies, potentially undermining the institutional basis for contesting recommendations or demanding explanations.
Despite these potential concerns, AI can, if properly designed and employed, offer two advantages: accelerating information processing and enhancing the consistency of judgments. AI can quickly and efficiently process large volumes of unstructured data, enabling faster analysis of complex proposals and legal documents. It also allows for pre-formulated evaluation logics, which can reduce subjective variability and arbitrariness, thereby facilitating more impartial assessments.
The blog highlights the elements of the kind of regulatory framework necessary to address the risks of AI while effectively harnessing its benefits, and points to the EU’s Rating Regulation as a potential model.
