As discussed in our LEGALcurrents, on January 13, 2026, The Nasdaq Stock Market LLC (“Nasdaq”) posted a proposed rule on its website that, if approved by the Securities and Exchange Commission (“SEC”), would require companies listed on the Nasdaq Global Market and the Nasdaq Capital Market to maintain a minimum market value of listed securities of at least $5 million (the “MVLS Requirement”). On March 11, 2026, the SEC designated a longer period of time to take action on the proposed rule. On April 28, 2026, the SEC issued an order that institutes proceedings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to determine whether to approve or disapprove the proposed rule. For practical purposes, this means that the MVLS Requirement will not become effective in the short term: the proceedings include a deadline likely to fall in early June, after which the SEC will still need time to consider the comments and rebuttals related to the order.
Under Nasdaq’s proposed rule, if a company fails to meet the MVLS Requirement for 30 consecutive business days, its securities would be suspended and immediately delisted from Nasdaq, even if it is appealing a delisting determination to a Nasdaq Listing Qualifications Hearings Panel (the “Panel”). The proposed rule would also restrict the Panel’s ability to reverse a delisting determination, limiting reversals to situations where there was an error and the company never actually violated the MVLS Requirement. The Panel would not be able to consider any facts indicating that company subsequently regained compliance with the MVLS Requirement or grant a company any additional time to regain compliance.
Instead of approving or disapproving the proposed rule after an initial extension period, the SEC instituted proceedings to allow for additional comment on the proposed rule. Under the Exchange Act, to approve the rule, the SEC is required to find that the proposed Nasdaq rule is consistent with the Exchange Act. In its order, the SEC requested that commenters address whether the proposed rule includes sufficient analysis to support a conclusion that the proposed rule is consistent with the Exchange Act, which requires that the rules of a national securities exchange be designed to prevent manipulative acts and to protect investors and the public interest, and to provide fair procedure for the prohibition or limitation of any person with respect to access to services offered by the national securities exchange. It is unusual for the SEC to institute proceedings for proposed self-regulatory organization (“SRO”) rules, since the SRO and the SEC tend to work together to resolve these questions before rules are proposed or during the typical review period.
Two commenters expressed general support for the proposed rule, noting that highly speculative, low-priced securities pose heightened risk to investors, including the risk of fraud and manipulative trading schemes. Other commenters expressed concerns, stating that the proposal did not provide empirical evidence to support the proposed rule, such as evidence demonstrating that issuers below the proposed MVLS Requirement are financially distressed or pose heightened risks to investors that are not already addressed by existing Nasdaq and SEC requirements. Observations from other commenters included that the proposed rule (i) overlaps with recently adopted continued listing rules designed to address low-valuation risk factors; (ii) fails to consider sector-specific and situational factors; (iii) would impair a company’s ability to raise capital or obtain debt financing; (iv) could increase the potential for downward pressure on stock prices; and (v) could lead to manipulative trading and market abuse in an effort to drive down the value of a company’s securities.
The SEC is accepting additional comments on the proposed rule until 21 days after the order is published in the Federal Register and rebuttal comments until 35 days after the order is published in the Federal Register. If you have any questions about Nasdaq’s proposed rule, please contact a member of Harter Secrest & Emery LLP’s Securities and Capital Markets group.