SEC Roundup Ep 103: The Delisting Cliff – How Nasdaq's $5M Rule Threatens Small Public Companies

But for those people who are not perhaps as steeped as you are in all this, let me lay a little context.

So what we're talking about is a proposed NASDAQ rule.

So NASDAQ, obviously a securities exchange.

It is, in the words of SEC world, known as an SRO or a self-regulatory organization.

So it exists as a body that is overseen by the SEC.

So specifically here, what we're talking about is a rule that NASDAQ proposed.

So when NASDAQ wants to implement or deploy new rules, they first have to put out a proposed rule.

There is some back and forth with the SEC.

It's overseeing regulatory body.

And then after that process is complete, the rule is either approved or not approved or sometimes modified and approved.

And And so the specific proposal here was, and this is going back at least several months, Mark, you can correct me on the chronology that I get wrong, but NASDAQ proposed a rule that essentially would automatically suspend any company on its exchange whose market value stayed below $5 million for 30 business days.

I believe there was no cure period, no hearing first in this proposed rule.

So that's pretty alarming if you're a company that's sort of the market cap wobbles around that $5 million mark.

And so it got a lot of attention at the proposed rule stage.

And so there was some back and forth administratively between NASDAQ and the SEC.

And then I believe it was late July, the particular division within the SEC, probably on authority delegated from the commissioners themselves, approved the rule as it had been slightly modified as it came through this sausage-making process.

So that was I know you were both involved.

The small public company coalition was involved prior to that point.

But I think real alarm bells started going off when when trading and markets approved it.

And so you jumped into action and like seven days after the approval.

So this would be late July, early August.

the SBCC filed a notice of intention to petition the SEC to review this rule.

And the way this regulatory apparatus works, once you inform the SEC and NASDAQ that you intend to petition the SEC for review, that stops the rule.

So my understanding is at that point, the rule was basically frozen.

And then earlier this week, the SPCC filed its actual petition with the SEC and including analysis from Professor Lewis.