Always Evolving and Adapting

NASDAQ Capital Markets Listing Standards

The NASDAQ Stock Market has three tiers of listed companies: (1) the NASDAQ Global Select Market, (2) the NASDAQ Global Market and (3) the NASDAQ Capital Market. Each tier has higher listing standards than the last. The NASDAQ Global Select Market has the highest initial listing standards, while the NASDAQ Capital Market serves as the entry-level tier for most small-cap issuers.

A company that wants to list securities on NASDAQ must meet minimum listing requirements. These include specific financial, liquidity and corporate-governance criteria. NASDAQ has broad discretion over the listing process and may deny an application even if the technical requirements are met if it believes denial is necessary to protect investors and the public interest.

Once listed, a company must continue to meet ongoing listing standards. To apply for listing on NASDAQ, a company must complete and submit a listing application with the required documents and information.

The application process generally takes six to eight weeks. After the company applies, NASDAQ assigns an analyst to serve as the main point of contact. The company usually receives an initial comment letter within two to three weeks. The comment and review process continues until the application is approved or denied. Like filing with the SEC, a well-prepared NASDAQ application usually results in fewer comments and a smoother process. In most cases, the company’s securities counsel takes the lead in preparing the application and communicating with NASDAQ.

Like an SEC review process, NASDAQ reviews publicly available information about a company, including SEC filings, the company’s website, management communications, speeches and press releases. The back-and-forth process usually does not require a formal protocol, and communications typically occur by email and phone.

Partner-led and internationally focused, ANTHONY, LINDER & CACOMANOLIS, PLLC delivers regulatory-precise corporate and securities counsel—backed by a $20B+ transaction track record and deep Japan–U.S. listing experience—to guide IPOs, de‑SPACs, M&A and complex capital raises. Our U.S. entity formation attorneys represent clients worldwide and across the U.S., including West Palm Beach and Palm Beach County (FL), Jacksonville, Miami and Tampa (FL), and Houston, San Antonio and Dallas (TX); schedule a consultation at 877-541-3263 or visit our contact page.

Listing Criteria For NASDAQ Capital Markets

To list its securities on NASDAQ Capital Markets, a company is required to meet: (a) certain initial quantitative and qualitative requirements and (b) certain continuing quantitative and qualitative requirements. The quantitative listing thresholds for initial listing are generally higher than for continued listing, thus helping to ensure that companies have reached a sufficient level of maturity before listing. NASDAQ also requires listed companies to meet stringent corporate governance standards.

The following chart is copied from the NASDAQ website.

Requirements	Equity Standard	Market Value of Listed Securities Standard	Net Income Standard
Listing Rules	5505(a) and 5505(b)(1)	5505(a) and 5505(b)(2)	5505(a) and 5505(b)(3)
Stockholders’ equity	$5 million	$4 million	$4 million
Market value of unrestricted publicly held shares	$15 million	$15 million	$5 million
Operating history	2 years	N/A	N/A
Market value of listed securities	N/A	$50 million*	N/A
Net income from continuing operations (in the latest fiscal year or in two of the last three fiscal years)	N/A	N/A	$750,000
Unrestricted publicly held shares	1 million	1 million	1 million
Bid price or Closing Price^**	$4 $3	$4 $2	$4 $3
Corporate governance	Yes	Yes	Yes
Unrestricted round lot shareholders***	300	300	300
Market Makers	3	3	3
Listing Fee	Application fee – $5,000 first year annual fee depends on listed shares and ranges from $50,000 – $75,000	Application fee – $5,000 first year annual fee depends on listed shares and ranges from $50,000 – $75,000	Application fee – $5,000 first year annual fee depends on listed shares and ranges from $50,000 – $75,000
Total IPO Expenses****	Approximately $750,000	Approximately $750,000	Approximately $750,000

* Currently traded companies qualifying solely under the Market Value Standard must meet the $50 million market value of listed securities and the applicable bid price requirement for 90 consecutive trading days before applying.

** To qualify under the closing price alternative, a company must have: (i) average annual revenues of $6 million for three years, or (ii) net tangible assets of $5 million, or (iii) net tangible assets of $2 million and a 3-year operating history, in addition to satisfying the other financial and liquidity requirements listed above.

*** Securities subject to resale restrictions for any reason are excluded from the calculation of publicly held shares, market value of publicly held shares and round lot shareholders. In addition, except for SPACs listing under IM-5101-2, at least half of the minimum required number of round lot holders must each hold unrestricted securities with a minimum value of $2,500.

**** Includes legal, accounting, audit, underwriter expense reimbursement, SEC filing fee, road show expenses, EDGAR fees, NASDAQ listing fee, FINRA filing fee and DTC eligibility. Does not include underwriter commission/discount.

In addition to the above requirements, if the security is trading in the U.S. over-the-counter market as of the date of application, the security must have a minimum average daily trading volume of 2,000 shares (including trading volume of the underlying security on the primary market with respect to an ADR), over the 30-trading-day period prior to listing, with trading occurring on more than half of those 30 days, unless such security is listed on the Exchange in connection with a firm commitment underwritten public offering of at least $4 million.

Companies seeking listing in connection with a Regulation A offering must, at the time of approval of the listing, have a minimum operating history of two years.

A company that principally administers its business in a Restrictive Market, and is conducting an initial public offering, must offer a minimum amount of securities in a firm commitment underwritten public offering in the U.S. to public holders that (i) will result in gross proceeds to the company of at least $25 million or (ii) will represent at least 25% of the company’s post-offering Market Value of Listed Securities, whichever is lower. A company that is conducting a business combination with an entity that principally administers its business in a Restricted Market must have a minimum market value of unrestricted publicly held shares following the business combination equal to the lesser of (i) $25 million or (ii) 25% of the post-business combination entity’s market value of listed securities. A “Restrictive Market” is one in which NASDAQ determines to have secrecy laws, blocking statutes, national security laws or other laws, or regulations restricting access to information by regulators of U.S.-listed companies in such jurisdiction. In determining whether a company’s business is principally administered in a Restrictive Market, NASDAQ may consider the geographic locations of the company’s: (i) Principal business segments, operations or assets; (ii) Board and shareholders’ meetings; (iii) Headquarters or principal executive offices; (iv) Senior management and employees; and (v) Books and records. A jurisdiction that does not provide the PCAOB with access to conduct inspections of public accounting firms that audit NASDAQ-listed companies is a Restrictive Market. Currently, the only Restrictive Markets are China and Hong Kong.

Companies must meet the following corporate governance standards:

Corporate Governance Requirement	Description
Distribution of Annual or Interim Reports	The company must make its annual and interim reports available to shareholders, either by mail or electronically through the company’s website.
Independent Directors	NASDAQ requires listed companies to maintain independent directors and an audit committee. In general, the board of directors must include a majority of independent members. Certain exemptions apply for controlled companies and foreign private issuers. For a review of the new NASDAQ board diversity rules, see https://securities-law-blog.com/2021/09/07/sec-approves-nasdaq-board-diversity-rule/?hilite=%27nasdaq%27. For a review of NASDAQ board independence standards, see – https://securities-law-blog.com/2019/12/03/nasdaq-board-independence-standards/?hilite=%27nasdaq%27. For a review of the NYSE MKT board independence standards, see – https://securities-law-blog.com/2020/01/14/nyse-american-board-independence-standards/?hilite=%27independence%27%2C%27standards%27
Audit Committee	The company must have an audit committee composed entirely of independent directors who also meet the requirements of SEC Rule 10A-3 and can read and understand fundamental financial statements. The committee must include at least three members, and at least one member must have financial sophistication based on prior experience. For a drill down on NASDAQ audit committee requirements, see – https://securities-law-blog.com/2019/12/17/drill-down-on-nasdaq-audit-committee-requirements/?hilite=%27nasdaq%27. For a drill down on NYSE MKT audit committee requirements, see – https://securities-law-blog.com/2021/01/26/audit-committees-nyse-american/?hilite=%27audit%27%2C%27committee%27.
Compensation of Executive Officers	The company must have a compensation committee made up entirely of independent directors. The committee must have at least two members and is responsible for determining, or recommending to the full board, the compensation of the chief executive officer and other executive officers. Controlled companies and foreign private issuers are exempt.
Nomination of Directors	Independent directors must select or recommend nominees for directors. Controlled companies and foreign private issuers are exempt from this requirement.
Code of Conduct	The company must adopt a code of conduct applicable to all directors, officers and employees.
Annual Meetings	The company is required to hold an annual meeting of shareholders no later than one year after the end of its fiscal year. The company is required to solicit proxies for all shareholder meetings.
Quorum	The company must provide for a quorum of not less than 33 1/3% of the outstanding shares of it voting stock for any meeting of the holders of its common stock.
Conflict of Interest	The company must conduct appropriate review and oversight of all related party transactions for potential conflict of interest situations.
Shareholder Approval	The company is required to obtain shareholder approval of certain issuances of securities, including: · Acquisitions where the issuance equals 20% or more of the pretransaction outstanding shares, or 5% or more of the pretransaction outstanding shares when a related party has a 5% or greater interest in the acquisition target (see http://securities-law-blog.com/2019/03/26/the-20-rule-acquisitions/. · Issuances resulting in a change of control (see http://securities-law-blog.com/2019/04/09/nasdaq-and-nyse-american-shareholder-approval-requirements-change-of-control/. · Equity compensation (see https://securities-law-blog.com/2019/05/07/nasdaq-and-nyse-american-shareholder-approval-requirement-equity-based-compensation/?hilite=%27nasdaq%27. · Private placements where the issuance equals 20% or more of the pretransaction outstanding shares at a price less than the greater of book or market value (see http://securities-law-blog.com/2018/12/18/nasdaq-amends-its-20-dilution-shareholder-approval-rule/.
Voting Rights	Corporate actions or issuances cannot disparately reduce or restrict the voting rights of existing shareholders. For a review of the voting rights rules, see – https://securities-law-blog.com/2019/08/13/nasdaq-and-nyse-mkt-voting-rights-rules/?hilite=%27nasdaq%27.

The NASDAQ Application And Required Documents

The NASDAQ application package includes the following:

A symbol reservation form
The listing application (which requires supplemental documents)
The listing agreement
The corporate governance certification
The initial application fee, payable via check or wire transfer
A logo submission form

Applicants complete all forms online through the NASDAQ website listing center. The online platform allows users to upload supplemental and supporting documents. Applicants should review all documents in advance and prepare the required information before applying.

NASDAQ Symbol Reservation Form

The symbol reservation form is a one-page fill-in electronic form. NASDAQ symbols must be one to five characters and are governed by the Intermarket Symbols Reservation Authority (ISRA), designed to help organize symbols, prevent duplication, and reduce programming and operational complexities. The symbol reservation form requests three symbol choices in order of preference. Although Nasdaq will likely give the first choice if available, it has full authority to assign, rescind or reassign a trading symbol at any time.

An Overview Of The NASDAQ Application

NASDAQ has several listing applications depending on the circumstances of the listing sought. Twelve different listing applications vary from an application where there has been a change of control, to switching from another exchange or other U.S. market, such as the OTC Markets, to spin-offs and of course, an IPO. Each listing application is approximately seven pages long and requests detailed basic information about the company, such as address, contact and billing information, securities attorney and auditor information, transfer agent and officers and directors. In addition, the application form requests information on the specific securities, including type, par value and CUSIP number.

A NASDAQ application also requires the company to disclose particular inquiries, investigations, lawsuits, litigation, arbitrations, hearings, and other legal and administrative proceedings involving the company, its officers or directors, or 10 percent (10%) or more significant shareholders. Related to the company, the application requires the company to disclose any proceedings within the 10 years preceding the application date (i) that any regulatory civil or criminal agency initiated; (ii) that affect the company under state or federal securities, banking, insurance, tax or bankruptcy laws; or (iii) that allege fraud, deceit or misrepresentation. The company must provide backup and final disposition documents.

Related to officers, directors or 10 percent (10%) or more significant shareholders, the application requires disclosure of any proceedings within the 10 years preceding the application date (i) that were initiated by any regulatory civil or criminal agency; or (ii) which allege fraud, deceit or misrepresentation, and requested damages over $100,000. Again, backup and final disposition documents must be provided.

Companies must disclose all matters that fall within the requested category, including every inquiry, even when the inquiring party lacks jurisdiction to pursue a claim. FINRA’s Office of Fraud Detection and Market Surveillance also reviews trading activity and press releases and companies must disclose those investigations even when they appear benign.

The application asks additional questions about the company’s background and includes items that confirm compliance with the seasoning rules.

Companies must also disclose all private offerings, including bridge financings, shelf registrations and Regulation S offerings that they contemplate or complete within the six months before the filing. A planned, incomplete or canceled offering can trigger additional questions so companies should prepare private offerings carefully before pursuing a listing or uplisting.

NASDAQ requests supporting documents it considers relevant and requires specific materials with every application. The required supporting documents vary according to the application type.

An application for an uplisting from an existing U.S. market, such as the OTC Markets, must include the following:

Letters from three market makers confirming their agreement to make a market in the subject securities upon acceptance of a NASDAQ listing
A listing agreement
A logo submission form
A corporate governance certification form
Regulatory correspondence over the past 12 months
Shareholder confirmation documents

Moreover, in an uplisting application, NASDAQ frequently requests written confirmation from the company’s transfer agent that the security is eligible for DRS (direct registration program).

Other common follow-up questions from NASDAQ when reviewing an uplisting application include:

A request for a Broadridge share range analysis and NOBO list.
A request for a certified shareholder list.
Questions related to the mitigation of any going concerns or opinions.
A request for income statement and/or balance sheet projections for the next 12 months.
Confirmation that all Sarbanes-Oxley Section 302 and 906 certifications have been made.
Confirmation that the auditors have reviewed all quarterly filings by SAS 100.

We can help ensure you understand and complete everything you need to in your application. Speak with an attorney from ANTHONY, LINDER & CACOMANOLIS, PLLC, by calling 877-541-3263.

The Listing Agreement

The Listing Agreement is a simple two-page agreement affirming the company’s agreement to comply with all rules and regulations of the NASDAQ Stock Market and indemnifying and holding NASDAQ harmless from liability. In particular, a listed company has harmless NASDAQ and agrees to indemnify the exchange from any harm resulting from third-party trademark infringement claims related to the company’s symbol and logo and NASDAQ’s use of the same. In addition, the listing agreement contains a disclaimer of warranty and liability against NASDAQ for trading issues other than those resulting from gross negligence or willful misconduct.

Corporate Governance Certification Form

The corporate governance certification form certifies compliance with the governance requirements related to an audit committee, director nomination process, compensation committee, board composition, executive sessions, quorum and codes of conduct. Where an exemption applies, the form requires specification of the exemption terms. The document specifies the different rules and exceptions in a check-the-box format.

Logo Submission Form

The logo submission form contains the guidelines for the logo and affirms NASDAQ’s rights to use the same. NASDAQ uses company logos in its marketing materials, on the MarketSite Video Wall and Tower and websites.

NASDAQ Entry Fees

NASDAQ calculates entry fees based on the total number of shares the company lists at the time of its initial listing, regardless of class, with a maximum cap of $75,000. NASDAQ assesses fees on the entry date in the NASDAQ Capital Market, except for $5,000, which represents a nonrefundable application fee. The company must submit this fee with its application.

NASDAQ assesses the listing fee as follows:

Up to 15 million$50,000, including a $5,000 application fee

Over 15 million$75,000, including a $5,000 application fee

NASDAQ does not charge application or entry fees for any securities transferred from a national securities exchange.

NASDAQ’s Annual Fees

Annual fees are based on the company’s Total Shares Outstanding (“TSO”) for all classes of stock listed on the Capital Market, as reported in the company’s latest filing on record with NASDAQ. NASDAQ prorates the company’s annual fee in the first year of listing based on the listing date.

For a company transferring to the NASDAQ Capital Market from the NASDAQ Global Select Market or Global Market, NASDAQ will apply a credit toward the balance of the company’s new annual fee based on the yearly price already paid.

We Help You Meet And Maintain NASDAQ Compliance

Your business must meet NASDAQ compliance standards when listing on this exchange. Learn more about our background and approach on our about page. Our team at ANTHONY, LINDER & CACOMANOLIS, PLLC, can help you understand and manage each stage of the application process. Call 877-541-3263 or complete our contact form to schedule an initial consultation today.