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Volume X, Number 220

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COVID-19: NASDAQ Proposal to Permit Longer Compliance Periods with Continued Listing Requirements

In continuation of the comprehensive nationwide regulatory effort to mitigate adverse effects of the COVID-19 pandemic on U.S. capital markets and ensuing market volatility, the NASDAQ Stock Market has proposed listing rule changes designed to ease the compliance burden by offering temporary relief from the continued listing minimum $1.00 per share bid price (Minimum Bid Price, Listing Rule 5550(a)(2) and market value of publicly held shares (MVPHS, Listing Rule 5550(a)(5)) listing requirements through June 30, 2020.

Under this regulatory initiative, listed companies will be given additional time to regain compliance with these price-focused requirements as follows:

  • Delayed compliance timeline for new instances of non-compliance – while the NASDAQ Listing Qualifications staff will continue notifying companies that fall out of compliance with the Minimum Bid Price and MVPHS listing requirements, the compliance periods for such newly noticed companies will not commence until July 1, 2020.

  • Suspended compliance timeline for ongoing instance of non-compliance – under the terms of the relief, compliance periods for any previously notified companies will be suspended until and resume on July 1, 2020, following which, companies would receive the balance of any pending compliance period or Hearings Panel exception to come back into compliance with the applicable requirement. Companies that were in the NASDAQ Hearings process would return to that process at the same stage they were in when the tolling period began. If the company had received a temporary exception from the Hearings Panel before the tolling began, the company would receive the balance of the exception period beginning on July 1, 2020. It is noteworthy, however, that a company in the NASDAQ Hearings process would nonetheless be delisted and not get the benefit of the tolling period if the company has had an oral or written hearing before a Hearings Panel and the Panel has reached a determination to delist, even if the Hearings Panel has not issued the written decision required by Listing Rule 5815(d)(1) and Rule 5840(c) prior to the proposed rule change taking effect. Companies that are newly identified as noncompliant during the tolling period would have 180 days to regain compliance, beginning on July 1, 2020.

Under the NASDAQ continued listing requirements, in order to regain compliance with the Minimum Bid Price listing requirement, the bid price of a listed company’s shares must close at or above $1.00 per share for a minimum of 10 consecutive business days prior to the prescribed compliance date. This, in turn, can be achieved either as a result of interaction of market supply or demand, or (more frequently, in practice) following a reverse stock split of a company’s listed securities and sustained trading in above the Minimum Bid Price.

During the tolling period, the NASDAQ Listing Qualifications staff will continue to monitor listed securities for compliance during the tolling period. Finally, the NASDAQ response is expected to evolve and expand as the staff continues to assess the impact of the COVID-19 pandemic on listed companies.

A full copy of the rule can be found here.

© 2020 Schiff Hardin LLPNational Law Review, Volume X, Number 111

TRENDING LEGAL ANALYSIS


About this Author

Partner

For more than 30 years, Ralph V. De Martino has devoted his practice to the representation of public and private companies, the officers and directors who serve them, and financial institutions, broker-dealers and associated members. Mr. De Martino is distinguished among his peers in matters involving public and private company capital formation, securities offerings, regulatory inquiries and enforcement proceedings, internal investigations, and corporate finance and governance matters. He regularly appears before the U.S. Securities and Exchange Commission, FINRA and securities...

202-724-6848
F. Alec Orudjev Capital Formation Attorney Schiff Hardin Washington, DC
Partner

Alec assists private and public companies with capital formation, corporate governance and compliance, and advises them on federal and state securities laws, rules and regulations. He counsels U.S. and international companies in a variety of matters, including:

  • Initial and secondary public offerings
  • Private equity and debt placements
  • Equity lines
  • Private investment in public equity (PIPE) transactions
  • At-the-market offerings

Alec is adept at guiding clients through the complexities of raising capital. His long experience working with regulators allows him to anticipate their concerns and work with them to avoid listing delays and keep a deal on course. He understands that timing is vital and is always conscious of the stakes involved for his clients.

When working on a deal, Alec often partners with other practice groups in the firm — including the Labor and Employment, Real Estate, Intellectual Property and Litigation Groups — to give clients the most insightful and effective counsel.

Throughout the process, Alec keeps clients fully involved and abreast of all critical information. He also frequently serves as a translator. And he always takes a personal stake in the success of the enterprise and the client, which fuels his unflinching work ethic.

Public Companies

Alec assists public companies with disclosure and compliance obligations under the Exchange Act, including counseling on preparation and filing of Form 10-K, 10-Q, 8-K and other reports, as well as proxy statement disclosures, shareholder proposals and annual meeting matters. He has experience as outside securities and corporate governance counsel to a number of exchange-listed companies, and he has represented investment banking clients as underwriters’ counsel in initial public offerings and follow-on public offerings of securities.

In addition, Alec counsels clients on:

  • Listing qualifications, continued listing and governance/ compliance listing requirements, and delisting matters for U.S. securities exchange-listed companies
  • Beneficial ownership reporting under Section 13 of the Exchange Act
  • Short-swing profits and beneficial ownership reporting under Section 16 of the Exchange Act
  • Insider trading under Rule 10b-5 and trading plans under Rule 10b5-1
  • Compliance matters relating to non-GAAP financial information and Regulations AC and FD, among others
  • “Going private” and “going dark” transactions
  • State “blue sky” law compliance
  • Financial restatements, internal investigations and crisis management
  • Disclosures under enforcement/regulatory inquiry, restatement and litigation circumstances

Corporate Compliance

Alec also advises clients on corporate governance and compliance issues arising from the Sarbanes-Oxley Act, Dodd-Frank Act, JOBS Act and related developments under the U.S. Securities and Exchange Commission rules and regulations. He is also experienced in FINRA/NASD broker-dealer compliance and reporting matters.

202.724.6846