SEC Approves Nasdaq Rule Tightening Delisting for Securities Below $0.10
The SEC approved amendments to Nasdaq listing rules that accelerate delisting for companies whose securities trade at or below $0.10 for ten consecutive business days.
The rule will eliminate compliance periods for such companies and immediately suspend trading on Nasdaq upon issuance of a Staff Delisting Determination.
Under the amended Nasdaq Rule 5810(c)(3)(A)(iii) ("Notification of Deficiency by the Listing Qualifications Department"), a company whose security closes at or below $0.10 for ten consecutive business days will receive an immediate Staff Delisting Determination and suspension from trading, regardless of whether the company is already in a compliance period for the minimum $1.00 bid price requirement. Previously, the $0.10 threshold only applied to companies already in a compliance period for bid price deficiencies. The Exchange stated that companies facing such severe price declines typically experience deep financial or operational distress unlikely to be temporary, making them unlikely to regain compliance within standard compliance periods.
The amendments also modify Nasdaq Rule 5815(a)(1)(B)(ii) ("Review of Staff Determinations by Hearings Panel") to prohibit companies from continuing to trade on Nasdaq during appeals of delisting determinations related to the $0.10 threshold. Companies may still appeal to the Hearings Panel, which retains discretion to grant up to 180 days to regain compliance. The Exchange noted that securities trading below $0.10 share characteristics with penny stocks but are exempt from Penny Stock Rules that provide enhanced investor protections.
The SEC determined the rule changes are consistent with Exchange Act Section 6(b)(5) ("National securities exchanges") because they protect investors by preventing prolonged trading of very low-priced securities that may lack sufficient public float and trading interest to promote fair and orderly markets. The SEC also found the amendments consistent with Exchange Act Section 6(b)(7) because affected companies retain appeal rights and the Hearings Panel may grant exceptions where appropriate.
The rule takes effect 45 days after SEC approval.