Comparator’s Wild Ride Forces Nasdaq ‘Small Cap’ Review

Spurred by a harsh regulatory spotlight on one of its small-company stocks, the Nasdaq stock market said late Tuesday that it will thoroughly review its listing requirements for the first time in five years.

The reexamination of guidelines for small companies comes amid widening questions about financial statements released by Comparator Systems Corp. The Securities and Exchange Commission on Tuesday suspended trading in the small fingerprint-technology company’s shares for 10 days on concerns that it inflated assets on balance sheets.

Investors sued Comparator in California state court on Friday, claiming they lost $300 million after the stock price soared early last week and then plunged. The stock last traded May 8, closing at 56 cents a share.

Minimum standards for the 1,359 “small cap” companies listed on Nasdaq now include $2 million in assets, capital and surplus of $1 million, 100,000 common shares with a market value of $200,000, and 300 shareholders.

Standards are slightly higher when a company first lists on the market, including a minimum of $4 million in assets and $2 million in capital and surplus.

A total of 5,100 companies currently list on the Nasdaq, the second-largest stock market, after the New York Stock Exchange.

The National Assn. of Securities Dealers, the overseer of the Nasdaq market, has already asked Comparator to publicly clarify information on its assets, tests of its products and other items important to investors. No such information has yet been released. Phone calls were not answered Tuesday at Comparator’s Irvine offices.