On December 19, 2025, the Securities and Exchange Commission (the “SEC”) approved a proposed rule from The Nasdaq Stock Market LLC (“Nasdaq”), which grants Nasdaq limited discretion to deny initial listing for a company even if the company meets Nasdaq’s listing requirements.
Under the new IM-5101-3, Nasdaq now has the authority to deny an initial listing if it determines a security could be susceptible to market manipulation. This determination would be based on concerns identified with similarly situated previously listed companies or other considerations related to the company’s advisors, even if the company meets all applicable Nasdaq listing requirements.
Under this new authority, Nasdaq will consider the following non-exclusive factors when determining whether to deny an initial listing:
- Where the company is located;
- Whether a person or entity exercises substantial influence over the company, and, if so, where such person or entity is located;
- Whether the expected public float and dissemination of shares will raise concerns about adequate liquidity and potential concentration;
- Whether there are any issues with the company’s advisors, including whether any advisors were involved in past transactions where the securities became subject to a pattern of concerning or volatile trading;
- Whether the company’s management and board of directors has experience or familiarity with U.S. public company requirements;
- Any SEC, Financial Industry Regulatory Authority, or other regulatory referrals related to the company or its advisors and the results of any referral;
- Whether the company has, or recently had, a going concern opinion, and, if so, the company’s plan to continue as a going concern; and
- Whether there are other factors that raise concerns about the integrity of the company’s board of directors, management, significant shareholders, or advisors.
This new rule has become immediately effective. We will continue to monitor Nasdaq’s implementation of this new rule. If you have any questions about the Nasdaq initial listing process, please contact a member of Harter Secrest & Emery LLP’s Securities and Capital Markets group.