Notice2026-11379
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Noticing of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Adopt Listing Rule IM-5101-4
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 8, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 109 (Monday, June 8, 2026)</title>
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[Federal Register Volume 91, Number 109 (Monday, June 8, 2026)]
[Notices]
[Pages 34675-34680]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-11379]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105603; File No. SR-NASDAQ-2026-009]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Noticing of Filing of Amendment No. 1 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To
Adopt Listing Rule IM-5101-4
June 3, 2026.
I. Introduction
On February 20, 2026, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt Nasdaq Rule IM-5101-4,
which would provide Nasdaq with the authority to delist a security
where the Commission has previously suspended trading and the Exchange
determines it appropriate and in the public interest to do so. The
proposed rule change was published in the Federal Register on March 6,
2026.\3\ On April 16, 2026, pursuant to Section 19(b)(2) of the Act,\4\
the Commission designated a longer period within which to take action
on the proposed rule change.\5\ On May 21, 2026, the Exchange filed
Amendment No. 1 to the proposed rule change, which superseded the
original filing in its entirety.\6\ The Commission is publishing this
notice and order to solicit comments on Amendment No. 1 from interested
persons and to approve the proposed rule change, as modified by
Amendment No. 1, on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 104917 (Mar. 3,
2026), 91 FR 11104 (``Notice''). Comments received on the proposed
rule change are available at: <a href="https://www.sec.gov/rules-regulations/public-comments/sr-nasdaq-2026-009">https://www.sec.gov/rules-regulations/public-comments/sr-nasdaq-2026-009</a>.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 105252, 91 FR 21353
(Apr. 21, 2026). The Commission designated June 4, 2026, as the date
by which the Commission shall approve, disapprove, or institute
proceedings to determine whether to disapprove the proposed rule
change. See id.
\6\ In Amendment No. 1, the Exchange: (1) provided additional
description of certain aspects of the proposal; (2) made technical
and non-substantive changes to the proposal; and (3) addressed
comments received on the proposal. The full text of Amendment No. 1
can be found on the Commission's website at: <a href="https://www.sec.gov/comments/SR-NASDAQ-2026-009/srnasdaq2026009-789019-2393806.pdf">https://www.sec.gov/comments/SR-NASDAQ-2026-009/srnasdaq2026009-789019-2393806.pdf</a>
(``Amendment No. 1'').
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II. Description of Proposed Rule Change, as Modified by Amendment No. 1
<SUP>7</SUP>
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\7\ All capitalized terms not otherwise defined in this order
shall have the meanings set forth in the Nasdaq Listing Rules.
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The Nasdaq Rule 5000 Series contains rules related to the
qualification, listing, and delisting of companies on the Exchange.
Currently, Nasdaq Rule 5101 provides that, in addition to applying the
enumerated criteria set forth in the Nasdaq Rule 5000 Series, the
Exchange has broad discretionary authority over the initial and
continued listing of securities on Nasdaq in order to maintain the
quality of and public confidence in its market, to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and to protect investors and the public interest.
Among other things, the Exchange may use this discretion to suspend and
delist particular securities based on any event, condition, or
circumstance that exists or occurs that makes continued listing on
Nasdaq inadvisable or unwarranted in the opinion of Nasdaq, even though
the securities meet all enumerated criteria for continued listing.\8\
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\8\ See Nasdaq Rule 5101.
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The Exchange proposes to adopt Nasdaq Rule IM-5101-4 to provide
that where a security exhibits trading activity that is indicative of
potential manipulation, and the Commission has implemented a temporary
trading suspension of that security pursuant to Section 12(k) of the
Act (``Section 12(k) suspension''),\9\ the Exchange may exercise its
authority under Nasdaq Rule 5101 to delist the security when it
determines that doing so is necessary to protect investors. As
proposed, the Exchange would be permitted to exercise the discretionary
authority even when the security and the listed company otherwise
satisfy all applicable Nasdaq listing standards at the time of
determination.\10\
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\9\ 15 U.S.C. 78l(k). Under Section 12(k) of the Act, if in its
opinion the public interest and the protection of investors so
require, the Commission is authorized by order to summarily suspend
trading in any security (other than an exempted security) for a
period not exceeding ten business days. 15 U.S.C. 78l(k)(1)(A).
\10\ See proposed Nasdaq Rule IM-5101-4.
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The Exchange states that it would exercise its discretion to delist
a company on a case-by-case basis, and in applying that discretion, it
would consider whether the listed securities may be susceptible to
manipulation based on factors related to concerns the Exchange and
other regulators have identified with companies that previously were
the subject of
[[Page 34676]]
problematic or unusual trading, including considerations related to the
company's advisors (including auditors, underwriters, law firms,
brokers, clearing firms, or other professional service providers that
are currently or have in the past worked for the company).\11\ In
particular, in making the determination to delist a security, the
Exchange will consider all relevant facts and circumstances, including
the following:
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\11\ See Amendment No. 1, supra note 6, at 5.
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<bullet> where the company is located, including the availability
of legal remedies to U.S. shareholders in that jurisdiction, the
existence of blocking statutes, data privacy laws and other laws in
foreign jurisdictions that may present challenges to regulators seeking
to enforce rules against the company, the ability of parties to conduct
comprehensive due diligence in that jurisdiction, and the transparency
of regulators in the jurisdiction;
<bullet> whether a person or entity exercises substantial influence
over the company and, if so, where that person or entity is located,
including the availability of legal remedies to U.S. shareholders in
that jurisdiction, the existence of blocking statutes, data privacy
laws and other laws in foreign jurisdictions that may present
challenges to regulators seeking to enforce rules against the person or
entity, the ability of parties to conduct comprehensive due diligence
in that jurisdiction, and the transparency of regulators in the
jurisdiction;
<bullet> whether the public float, share distribution and trading
patterns in the company's security raise concerns about adequate
liquidity and potential concentration, including consideration of other
explanations of any observed volatility or significant price moves;
<bullet> evidence of third-party social media activity or similar
schemes designed to influence price and demand in the security;
<bullet> disclosures of material news by the company, and whether
such disclosures adequately explain the trading activity observed;
<bullet> whether the company has recently issued securities and the
terms of any such issuances, including the size of any discounts;
whether such shares are subject to resale; and whether the company
obtained shareholder approval for the share issuance (without regard to
whether an exemption to Nasdaq's shareholder approval for the issuance
was available);
<bullet> whether there are issues concerning the company's advisors
(including auditors, underwriters, law firms, brokers, clearing firms,
or other professional service providers), based on factors including,
but not limited to, whether the advisor has been reviewed by applicable
regulators and, if so, what were the results of those reviews;
[cir] if the company's advisor is a new entity, whether the
advisor's principals were involved with other firms with a regulatory
history;
<bullet> whether any of the company's advisors were involved in
other transactions where the securities became subject to a pattern of
concerning or volatile trading;
<bullet> whether the company's management and Board has experience
or familiarity with U.S. public company requirements, including
regulatory and reporting requirements under Nasdaq rules and federal
securities laws;
<bullet> whether there are any FINRA, SEC or other regulatory
referrals related to the company or its advisors, or the trading of the
company's securities, which can be included in the record of the matter
and, if applicable, the results of those referrals;
<bullet> whether the company currently has, or recently has had, a
going concern audit opinion and, if so, what is the company's plan to
continue as a going concern;
<bullet> whether there are other factors that raise concerns about
the integrity of the company's board, management, significant
shareholders, or advisors; and
<bullet> any other material information, whether mitigating or
concerning, provided by the company or otherwise available in the
record of the matter.\12\
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\12\ See proposed Nasdaq Rule IM-5101-4. The Exchange states
that these factors are based in part on the factors in Nasdaq Rule
IM-5101-3 (Application of Discretion to Deny Initial Listing). See
Amendment No. 1, supra note 6, at 5.
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Proposed Nasdaq Rule IM-5101-4 specifies that because trading
activity that is indicative of potential manipulation may occur when a
security lacks sufficient public float, investor base, or trading
interest to support the depth and liquidity necessary to maintain a
fair and orderly market, the Exchange may use this authority even where
the potential manipulation appears to be driven by third parties with
no known connection to the company, and even where Nasdaq cannot
determine whether the company or any associated individual was
involved. Further, the Exchange will consider evidence provided by the
company that there is sufficient public float, investor base, or
trading interest.\13\
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\13\ See proposed Nasdaq Rule IM-5101-4. The Exchange states
that when determining whether to apply this discretion, the Exchange
may request additional information from a company and such
information can form the basis for a trading halt under Nasdaq Rule
4120(a)(5)(B). See Amendment No. 1, supra note 6, at 8.
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Under the proposal, Exchange Staff will issue a Staff Delisting
Determination under Nasdaq Rule 5810(c)(1) if the Exchange determines
to delist a security pursuant to this authority.\14\ A company can seek
review of such a Staff Delisting Determination pursuant to Nasdaq Rule
5815.\15\
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\14\ ``Staff Delisting Determination'' means a written
determination by the Exchange's Listing Qualification Department to
delist a listed company's securities for failure to meet a continued
listing standard. See Nasdaq Rule 5805(h).
\15\ See proposed Nasdaq Rule IM-5101-4.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\16\ In particular, the
Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with Section 6(b)(5) of the Act,\17\
which requires, among other things, that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest, and not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Commission also finds that
the proposed rule change, as modified by Amendment No. 1, is consistent
with Section 6(b)(7) of the Act,\18\ which requires, among other
things, that the rules of an exchange provide fair procedure for the
prohibition or limitation by the exchange of any person with respect to
access to services offered by the exchange. In addition, the Commission
finds that the proposed rule change is consistent with Section 6(b)(8)
of the Act,\19\ which requires that the rules of an exchange do not
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
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\16\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\17\ 15 U.S.C. 78f(b)(5).
\18\ 15 U.S.C. 78f(b)(7).
\19\ 15 U.S.C. 78f(b)(8).
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The Commission has consistently recognized that the development and
[[Page 34677]]
enforcement of meaningful listing standards \20\ by an exchange is of
critical importance to financial markets and the investing public.\21\
Among other things, the Commission has stated that listing standards
provide the means for an exchange to screen issuers that seek to become
listed, and to provide listed status only to bona fide companies that
have or will have sufficient public float, investor base, and trading
interest to provide the depth and liquidity to promote fair and orderly
markets.\22\ Meaningful listing standards also are important given
investor expectations regarding the nature of securities that have
achieved an exchange listing, and the role of an exchange in overseeing
its market and assuring compliance with its listing standards.\23\
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\20\ This reference to ``listing standards'' refers to both
initial and continued listing standards.
\21\ See, e.g., Securities Exchange Act Release No. 57785 (May
6, 2008), 73 FR 27597 (May 13, 2008) (SR-NYSE-2008-17).
\22\ See, e.g., Securities Exchange Act Release Nos. 81856 (Oct.
11, 2017), 82 FR 48296, 48298 (Oct. 17, 2017) (SR-NYSE-2017-31);
81079 (July 5, 2017), 82 FR 32022, 32023 (July 11, 2017) (SR-NYSE-
2017-11); 65708 (Nov. 8, 2011), 76 FR 70799, 70802 (Nov. 15, 2011)
(SR-NASDAQ-2011-073); 63607 (Dec. 23, 2010); 75 FR 82420, 82422
(Dec. 30, 2010) (SR-NASDAQ-2010-137); and 57785 (May 6, 2008), 73 FR
27597, 27599 (May 13, 2008) (SR-NYSE-2008-17). The Commission has
stated that adequate listing standards, by promoting fair and
orderly markets, are consistent with Section 6(b)(5) of the Act, in
that they are, among other things, designed to prevent fraudulent
and manipulative acts and practices, promote just and equitable
principles of trade, and protect investors and the public interest.
See, e.g., Securities Exchange Act Release Nos. 82627 (Feb. 2,
2018), 83 FR 5650, 5633, n.53 (Feb. 8, 2018) (SR-NYSE-2017-30);
87648 (Dec. 3, 2019), 84 FR 67308, 67314, n.42 (Dec. 9, 2019) (SR-
NASDAQ-2019-059); and 88716 (Apr. 21, 2020), 85 FR 23393, 23395,
n.22 (Apr. 27, 2020) (SR-NASDAQ-2020-001).
\23\ See, e.g., Securities Exchange Act Release Nos. 88716 (Apr.
21, 2020), 85 FR 23393 (Apr. 27, 2020) (SR-NASDAQ-2020-001); 88389
(Mar. 16, 2020), 85 FR 16163 (Mar. 20, 2020) (SR-NASDAQ-2019-089).
See also Securities Exchange Act Release No. 81856 (Oct. 11, 2017),
82 FR 48296, 48298 (Oct. 17, 2017) (SR-NYSE-2017-31) (stating that
``[a]dequate standards are especially important given the
expectations of investors regarding exchange trading and the
imprimatur of listing on a particular market'' and that ``[o]nce a
security has been approved for initial listing, maintenance criteria
allow an exchange to monitor the status and trading characteristics
of that issue . . . so that fair and orderly markets can be
maintained'').
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The Exchange states that its listing standards include continuing
financial and liquidity requirements that are designed to help ensure
that listed companies maintain sufficient public float, investor base,
and trading interest, to promote fair and orderly markets, while also
allowing companies of all sizes to raise capital.\24\ According to the
Exchange, notwithstanding these requirements, it has recently observed
problematic or unusual trading in certain listed companies.\25\ The
Exchange states that such trading has apparently been effectuated
through recommendations made to investors by unknown persons via social
media to purchase, hold, and/or sell the securities.\26\ The Commission
has also issued Section 12(k) suspensions of trading in securities in
companies based on potential manipulation by third-parties through the
use of recommendations that appear to be designed to artificially
inflate the price and trading volume of the securities and a
determination that the public interest and the protection of investors
require a suspension of trading in the securities.\27\ The Exchange
states that it believes that the ability of third parties to manipulate
a security's price can indicate that the security does not have
sufficient liquidity, and the issuing company does not have sufficient
market interest, for listing to be appropriate.\28\
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\24\ See Amendment No. 1, supra note 6, at 4.
\25\ See id.
\26\ See id.
\27\ See id. See also, e.g., Securities Exchange Act Release
Nos. 104112 (Sept. 26, 2025) (Smart Digital Group Limited), 104113
(Sept. 26, 2025) (QMMM Holding Limited), 104163 (Oct. 3, 2025)
(Etoiles Capital Group Co., Ltd.), 104164 (Oct. 3, 2025) (Platinum
Analytics Cayman Limited), 104165 (Oct. 3, 2025) (Pitanium Limited),
104166 (Oct. 8, 2025) (Empro Group Inc.), 104167 (Oct. 8, 2025)
(NusaTrip Incorporated), 104168 (Oct. 16, 2025) (Premium Catering
(Holdings) Limited), 104169 (Oct. 22, 2025) (Robot Consulting Co.,
Ltd.), 104176 (Nov. 11, 2025) (Charming Medical Limited), 104317
(Dec. 4, 2025) (Magnitude International Ltd), 104613 (Jan. 14, 2026)
(JM Group Limited), 104763 (Feb. 1, 2026) (TechCreate Group Ltd.).
\28\ See Amendment No. 1, supra note 6, at 4-5.
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As discussed above, proposed Nasdaq Rule IM-5101-4 addresses the
Exchange's use of its discretionary authority to delist a company
based, in part, on the presence of potentially manipulative trading
activity. Specifically, where a security exhibits trading activity
indicative of potential manipulation and the Commission has implemented
a Section 12(k) suspension, the Exchange may exercise its authority
under Nasdaq Rule 5101 to allow it to delist the security where it
determines such action is necessary to protect investors. In exercising
its discretion, the Exchange will consider all relevant facts and
circumstances, including a set of identified factors.
One commenter expressed support for the proposal, stating that it
will enable Nasdaq to immediately begin the delisting process when a
company is the subject of a Section 12(k) suspension and ``Nasdaq, in
its gatekeeping role as a national securities exchange, determines that
the company may be susceptible to manipulation based on Nasdaq's
evaluation of the factors in the [p]roposal.'' \29\ This commenter
stated that, in general, the Commission's recent Section 12(k)
suspensions have followed ``manipulative schemes operated by unknown
persons, who make recommendations to investors via social media
designed to artificially inflate the price and volume of the securities
of the target company.'' \30\ This commenter also stated that it
supports Nasdaq's inclusion of the factors it will consider when
determining whether to initiate delisting proceedings for securities
that have been subject to a Section 12(k) suspension.\31\
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\29\ Letter from Katie Kolchin, Managing Director, Head of
Equity & Options Market Structure and Gerald O'Hara, Vice President
& Assistant General Counsel, SIFMA, dated Mar. 27, 2026 (``SIFMA
Letter''), at 1.
\30\ Id. at 2.
\31\ See id. at 2.
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Other commenters raised concerns regarding the proposal.\32\
Several commenters opposed the proposal because it would grant Nasdaq
authority to delist a company even without any wrongdoing on the part
of the company or its management.\33\ Commenters also raised concerns
that the proposal provides the Exchange with broad discretionary
authority and lacks objective standards to constrain Exchange decision-
making.\34\ Similarly, several commenters stated that the proposal
invites arbitrary application.\35\
[[Page 34678]]
One commenter stated that the Exchange has not demonstrated the
existence of a systemic problem that would require this delisting
power.\36\ Additionally, commenters stated that delisting a company in
these circumstances would harm the company's shareholders.\37\
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\32\ See Letters from Aseel, dated Apr. 23, 2026 (``Aseel
Letter''); Salem Alruwisan, dated Apr. 8, 2026 (``Alruwisan
Letter''); Asma, dated Apr. 7, 2026 (``Asma Letter''); Ahmad, dated
Apr. 3, 2026 (``Ahmad Letter''); Marc Indeglia, The Small Public
Company Coalition, dated Mar. 27, 2026 (``SPCC Letter''); Alex
Cheung, dated Mar. 24, 2026 (``Cheung Letter''); Rob, dated Mar. 24,
2026 (``Rob Letter''). See also Letter from Hamad Aldossary, dated
Apr. 21, 2026 (``H. Aldossary Letter'') (expressing concerns, as a
retail investor, about the current situation surrounding a company
that has been subject to a Section 12(k) suspension); Letter from
Khaled Aldossary, dated Apr. 21, 2026 (``K. Aldossary Letter'')
(same); Letter from Abdulrhman kamal alabdali, dated Apr. 2, 2026
(stating that it is ``unclear'' why new customers do not receive
sufficient warnings or safeguards regarding ``high-risk or
potentially delisted stocks''). The Commission also received a
comment letter regarding changes to the index methodology for the
Nasdaq 100. See Letter from Habib Fanny, dated Mar. 16, 2026. This
comment is not germane to the proposal.
\33\ See Aseel Letter; Ahmad Letter; Asma Letter; Alruwisan
Letter; Cheung Letter; Rob Letter; SPCC Letter.
\34\ See Rob Letter; Ahmad Letter; Asma Letter; Cheung Letter;
SPCC Letter at 9-11.
\35\ See Aseel Letter (``[i]f delisting becomes an arbitrary
process based on subjective interpretations of `public interest,'
investors will permanently withdraw''); SPCC Letter at 12 (stating
that the proposal ``establishes a standardless regime under which
Nasdaq may decide--based on open-ended factors, catchall provisions,
and whatever else it deems relevant''); Cheung Letter (stating that
the proposal provides ``broad, post-facto power to delist on a
seemingly arbitrary basis after investors have already purchased
shares''); Rob Letter (``arbitrary power risks abuse and erodes the
fairness that U.S. capital markets are supposed to uphold'').
\36\ See SPCC Letter at 2-4.
\37\ See SPCC Letter at 6; Ahmad Letter; Rob Letter; H.
Aldossary Letter; K. Aldossary Letter. One commenter also stated
that ``the proposal does not target the wrongdoer; it punishes the
victim.'' SPCC Letter at 6.
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In response to commenters, the Exchange states that the
Commission's recent Section 12(k) suspensions reflect a demonstrated
and recurring pattern of activity.\38\ The Exchange also states that
its existing continued listing standards do not currently address the
distinct risk posed by third-party manipulation schemes that exploit
structural vulnerabilities in a company's securities because existing
quantitative metrics are not designed to capture these schemes arising
from third-party conduct.\39\ According to the Exchange, the proposal
is a ``prophylactic measure'' designed to protect investors from
continued exposure to securities that have demonstrated a
susceptibility to manipulation.\40\ The Exchange states that where it
appears that a company is subject to manipulation by third parties, it
is indicative that a security may not have sufficient liquidity, and
the issuing company may not have sufficient market interest, for
continued listing to be appropriate.\41\ The Exchange states that
therefore the proposal is appropriate, without regard to specific
misconduct by the issuer.\42\ The Exchange also states that proposed
Nasdaq Rule IM-5101-4 enumerates specific factors that the Exchange
will consider to determine whether delisting is appropriate, all of
which are directly relevant to assessing whether a security's
structural characteristics and market history make it susceptible to
manipulation.\43\
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\38\ See Amendment No. 1, supra note 6, at 9.
\39\ See id.
\40\ See id. at 11.
\41\ See id.
\42\ See id.
\43\ See id. at 12.
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The Exchange's proposal is reasonably designed to protect investors
and the public interest by specifying that the Exchange will exercise
its discretion to delist a company's security if the security exhibits
trading activity indicative of potential manipulation, the Commission
has imposed a Section 12(k) suspension relating to that security, and
the Exchange determines that delisting the security is necessary to
protect investors. The Commission agrees that the presence of
potentially manipulative trading activity may indicate that a security
lacks sufficient public float, investor base, or trading interest to
provide the depth and liquidity to promote fair and orderly markets. In
these circumstances, the security may continue to be susceptible to
manipulative trading activity. Moreover, the Commission agrees that it
is consistent with the Act for the Exchange to exercise its
discretionary authority as the listing exchange and delist a security
that is exhibiting potentially manipulative trading activity when the
Exchange determines that delisting is necessary to protect investors,
even if the Exchange cannot determine that the company or any
individuals associated with the company were involved.\44\ In setting
forth how the Exchange will apply its discretionary authority over
continued listing in these circumstances, the proposal is reasonably
designed to reduce the risk of manipulative trading, promote just and
equitable principles of trade, and help to protect investors and the
public interest.
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\44\ See In re Tassaway, Securities Exchange Act Release No.
11291, 45 SEC. 706, 709. 1975 SEC LEXIS 2057, at 6 (Mar. 13, 1975)
(``[P]rimary emphasis must be placed on the interests of prospective
future investors . . . [who are] entitled to assume that the
securities in [Nasdaq] meet [Nasdaq's] standards.'').
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The Exchange's consideration of the factors enumerated in proposed
Nasdaq Rule IM-5101-4, among ``all relevant facts and circumstances,''
when making its delisting determination should help the Exchange make a
reasoned decision about whether to delist a security that is exhibiting
trading activity indicative of potential manipulation. The factors are
based, in part, on factors used in Nasdaq Rule IM-5101-3, which
provides that the Exchange may use its discretionary authority under
Nasdaq Rule 5101 to deny initial listing to a company based on factors
that make the company's security susceptible to manipulation.\45\ The
factors in proposed Nasdaq Rule IM-5101-4 also include additional
considerations specific to continued listing and Section 12(k)
suspensions, including, but not limited to, trading patterns, evidence
of third-party social media activity, disclosure of material news, and
recent securities issuances. Proposed Nasdaq Rule IM-5101-4 also
provides that the Exchange will consider any other material
information, whether mitigating or concerning, provided by the company
or otherwise available in the record of the matter; and will consider
evidence provided by the company that there is sufficient public float,
investor base, or trading interest to support a fair and orderly
market. The Exchange's application of these factors to make a case-by-
case determination, rather than automatically delisting a company's
security based on the presence of a Section 12(k) suspension or
specific trading observations alone, will allow the Exchange to use its
judgment to determine whether or not continued listing is appropriate.
Further, if the Exchange issues a Staff Delisting Determination in
accordance with proposed Nasdaq Rule IM-5101-4, the affected company
will be able to seek review pursuant to Nasdaq Rule 5815. The proposed
rule therefore is reasonably designed to prevent fraudulent and
manipulative acts and practices, protect investors and the public
interest, and to help ensure that the Exchange applies its discretion
to delist a company's securities in a manner that is not unfairly
discriminatory, consistent with Section 6(b)(5) of the Act.
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\45\ See Nasdaq Rule IM-5101-3. Nasdaq Rule IM-5101-3 contains a
non-exclusive list of factors that the Exchange will consider in
making its determination of whether to deny initial listing even if
the applicant meets all stated listing requirements. Many of these
same factors are in proposed Nasdaq Rule IM-5101-4, including the
existence of laws in foreign jurisdictions that may present
challenges to regulators seeking to enforce rules against the
company; whether any of the company's advisors were involved in
prior transactions where the securities became subject to a pattern
of concerning or volatile trading; whether there are any regulatory
referrals related to the company or its advisors; and whether the
company currently has, or recently has had, a going concern audit
opinion.
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Several commenters stated that companies have no practical way to
monitor or prevent manipulative online behavior by unrelated third
parties and bad actors (including competitors) that could be
incentivized to abuse the proposed rule to trigger suspension and
delisting of a targeted company.\46\ In response, the Exchange states
that, under the proposal, delisting is not a guaranteed outcome and the
Exchange will apply the enumerated factors in determining whether it is
appropriate to delist a security.\47\ The Exchange also states that
Section 12(k) suspensions ``remain very rare, making it difficult for a
competitor or other bad actor to predict when a suspension may be
imposed.'' \48\ As discussed above, the
[[Page 34679]]
ability for third parties to manipulate a security's price may indicate
that the security does not have sufficient liquidity to promote fair
and orderly markets. The Exchange's application of its discretionary
authority and consideration of the enumerated factors, in addition to
the evidence of potentially manipulative trading activity and presence
of a Section 12(k) suspension, is reasonably designed to ensure that a
security will be delisted when it is consistent with the protection of
investors and the public interest.
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\46\ See Cheung Letter; Rob Letter; SPCC Letter at 2, 6.
\47\ See Amendment No. 1, supra note 6, at 11.
\48\ Id. The Exchange states that the type of underlying bad
actor activity raised by these commenters would violate the anti-
fraud provisions of the federal securities laws. See id.
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One commenter stated that a Section 12(k) suspension could ``become
the trigger for immediate and effectively indefinite removal from a
national securities exchange.'' \49\ Another commenter stated that the
proposal raises ``serious'' due process concerns because there would be
``no clear, objective criteria, no required hearing, and no meaningful
appeal process.'' \50\ In response, the Exchange states that delisting
would not be automatic upon a Section 12(k) suspension, but instead the
Section 12(k) suspension would be a prerequisite, after which the
Exchange would exercise case-by-case discretion considering all
relevant facts and circumstances, including those factors enumerated in
proposed Nasdaq Rule IM-5101-4, which include a consideration of
mitigating information provided by the company.\51\ The Exchange also
states that under Nasdaq Rule 5810, Nasdaq Staff would issue a
delisting letter setting forth the factual bases for the Staff
Delisting Determination.\52\ The company could seek review of the Staff
Delisting Determination before a Hearings Panel pursuant to Nasdaq Rule
5815, which appeal would stay any suspension or delisting action, and
the company also could appeal to the Nasdaq Listing and Hearing Review
Council (``Listing Council'') pursuant to Nasdaq Rule 5820 and seek
relief from the Commission under Section 19(d) of the Act.\53\
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\49\ SPCC Letter at 4-5.
\50\ Rob Letter. Another commenter stated that the proposal
raises due process concerns by allowing the delisting of companies
``based on `suspicion' rather than proven misconduct by the issuing
company.'' Ahman Letter.
\51\ See Amendment No. 1, supra note 6, at 10. The Exchange
states that this construct will help to ensure that no company is
delisted without an opportunity to demonstrate that its securities
can support a fair and orderly market. See id.
\52\ See id.
\53\ See id.
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The proposal provides for a fair procedure for the Exchange to make
a delisting determination. During the Exchange's consideration of
whether to delist a company, the company will have the opportunity to
provide evidence and narrative in support of its continued listing. The
company also will receive in writing the factual basis for the Staff
Delisting Determination and may appeal the Staff Delisting
Determination while remaining listed on the Exchange.\54\ During the
appeal process, the company will have another opportunity to provide
evidence and narrative in support of their continued listing to an
independent Hearings Panel, separate from the Nasdaq Staff who made the
delisting determination, as well as to the Listing Council and,
ultimately, the Commission.\55\ The proposed rule therefore is
consistent with Section 6(b)(7) of the Act in that it provides a fair
procedure for the prohibition or limitation by the Exchange of any
person with respect to access to services offered.
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\54\ See Nasdaq Rules 5810(a) and 5815.
\55\ See Nasdaq Rules 5805(d), 5815, and 5820; 15 U.S.C. 78s(d).
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Several commenters stated that the proposal would make raising
capital more difficult for small public companies and increase risks to
investors.\56\ While the Commission acknowledges that there are many
benefits to companies and their shareholders related to being listed on
a national securities exchange, these benefits do not override the need
for an exchange to maintain and enforce continued listing
standards.\57\ As discussed above, in the presence of potentially
manipulative trading activity and a Section 12(k) suspension, the
Exchange may exercise its discretionary authority to delist a security
when necessary to protect investors and the public interest, consistent
with Section 6(b)(5) of the Act. Accordingly, the proposal will not
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act, consistent with Section
6(b)(8) of the Act.
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\56\ See Cheung Letter; Rob Letter; SPCC Letter at 4-6. One
commenter states that the added risk of delisting under the proposal
would ``make it materially more difficult for small public companies
to attract and retain both equity and debt financing.'' SPCC Letter
at 5. This commenter also states that investors would ``likewise
bear substantial costs'' as ``delisting shifts trading from a
national securities exchange to less transparent and liquid venues,[
] increasing volatility and reducing oversight.'' Id. at 6.
\57\ See supra note 23 and accompanying text.
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Several commenters provided suggested alternatives to the proposal.
One commenter recommended ``the establishment of specific criteria,
linking delisting decisions to actual violations, and focusing on the
parties responsible for the manipulation.'' \58\ Another commenter
recommended, among other things, ``[c]lear and specific criteria for
delisting decisions'' and a ``[r]equirement for tangible evidence of
wrongdoing by the company.'' \59\ Another commenter recommended
mandatory ``safe harbor'' provisions and a ``cure period'' to protect
public investors from the fallout of delisting actions.\60\ In
addition, one commenter that supported the proposal stated that when
the Exchange determines to delist a company pursuant to the proposed
rule, ``it should also provide clarity and transparency to the
company's public shareholders regarding the expected timeline for
delisting the company from Nasdaq.'' \61\ These suggestions are not
part of Nasdaq's proposal and the Commission must approve the proposal
if it finds that the proposal is consistent with the Act and rules
thereunder. For the reasons discussed herein, the proposal is
consistent with the Act.\62\
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\58\ See Alruwisan Letter.
\59\ See Asma Letter.
\60\ See Ahmad Letter.
\61\ SIFMA Letter at 2. In response to this commenter, the
Exchange states that it requires a company to disclose receipt of a
Staff Delisting Determination within four business days on a Form 8-
K or by issuing a press release. See Amendment No. 1, supra note 6,
at 11, n.16; Nasdaq Rule 5810(b). In addition, Nasdaq maintains a
public library of FAQs that describe the delisting process,
including the applicable steps and time frames. See Amendment No. 1,
supra note 6, at 11, n.16.
\62\ The Commission's findings herein are based on a
determination that it is consistent with the Act for the Exchange to
adopt proposed Nasdaq Rule IM-5101-4 to provide how the Exchange
will utilize its authority under Nasdaq Rule 5101 to delist a
security where the security exhibits trading activity that is
indicative of potential manipulation, the Commission has implemented
a Section 12(k) suspension, and the Exchange determines that
delisting the security is necessary to protect investors. In this
order, the Commission does not take a position regarding the extent
of the Exchange's authority under current Nasdaq rules, including
Nasdaq Rule 5101, to delist a security in these circumstances.
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Based on the foregoing, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the Act.
IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning whether the proposed rule change, as modified by
Amendment No. 1, is consistent with the Act. Comments may be submitted
by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
[[Page 34680]]
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#1b696e777e36787476767e756f685b687e78357c746d"><span class="__cf_email__" data-cfemail="6a181f060f47090507070f041e192a190f09440d051c">[email protected]</span></a>. Please include
file number SR-NASDAQ-2026-009 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NASDAQ-2026-009. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-NASDAQ-2026-009 and should be submitted
on or before June 29, 2026.
V. Accelerated Approval of the Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
1 in the Federal Register. Amendment No. 1 provides additional clarity
to the proposal by (1) providing additional explanation of certain
aspects of the proposal; (2) providing responses to comment letters;
and (3) making other technical and non-substantive changes for
readability. The changes and additional discussion in Amendment No. 1
assist the Commission in evaluating the proposal and determining that
it is consistent with the Act. Amendment No. 1 does not alter any
substantive provisions of the proposed rule change, or raise any
regulatory issues substantially different, from what is set forth in
the Notice, which was subject to public comment. For these reasons, the
Commission finds good cause, pursuant to Section 19(b)(2) of the
Act,\63\ to approve the proposed rule change, as modified by Amendment
No. 1, on an accelerated basis.
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\63\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\64\ that the proposed rule change (SR-NASDAQ-2026-009), as
modified by Amendment No. 1, be and hereby is, approved on an
accelerated basis.
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\64\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\65\
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\65\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-11379 Filed 6-5-26; 8:45 am]
BILLING CODE 8011-01-P
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