SEC Approves Stricter Nasdaq Listing Rules

Nasdaq Stock Market Inc. said the Securities and Exchange Commission approved new, stricter listing requirements for both the Nasdaq National Market and the Nasdaq SmallCap Market. All Nasdaq-listed companies will now have to meet tougher financial, corporate governance and auditing standards, including a requirement that all Nasdaq stocks trade for at least $1 per share, in order to be listed. “The newly approved requirements represent our commitment to enhancing the quality and strength of our market,” said Frank Zarb, chairman and chief executive of Nasdaq’s parent, the National Assn. of Securities Dealers Inc. The rules were first proposed last year, for a period of public comment, after investigations were begun into the practices of such companies as Irvine-based Comparator Systems Corp. The SEC said that minimum requirements will also be increased for net tangible assets, market capitalization, public float and number of market-makers. Under the new rules, if a Nasdaq-listed stock falls below the $1 minimum bid price for 30 days, it will then have 90 days to rise above the $1 threshold. It must remain there for 10 consecutive days to be in compliance. In addition, companies listed on the Nasdaq SmallCap Market will now have to meet the more stringent corporate governance standards of the Nasdaq National Market. That means that the SmallCap-listed companies must hold annual shareholder meetings and seek shareholder approval for acquisitions and stock offerings. The stricter corporate governance rules also require the inclusion of at least two independent directors on the company’s board and a majority of independent directors on the board’s audit committee. And all Nasdaq-listed companies must subject their auditing and accounting practices to peer review every three years. The new rules take effect immediately and will apply retroactively to companies that filed to list after March 3, 1997.