The Securities and Exchange Commission (SEC) has paused its July 22, 2026, approval of a controversial Nasdaq proposal that would establish a new continued listing requirement mandating companies to maintain at least $5 million in market value of listed securities.
In a July 29 letter to Nasdaq Senior Counsel Nikolai Utochkin, the SEC said it had received notices of intent to petition for commission review of the approval, which had been issued by the agency’s Division of Trading and Markets under delegated authority. The commission posted five letters of petition, including one from the Small Public Company Coalition.
The July 22 approval order “is stayed until the Commission orders otherwise,” the SEC letter says.
The proposed rule, filed as SR-NASDAQ-2026-004, would add a $5 million Market Value of Listed Securities, or MVLS, continued listing standard for companies on the Nasdaq Global Select Market, Nasdaq Global Market and Nasdaq Capital Market.
MVLS is defined in Nasdaq rules as the consolidated closing bid price multiplied by the relevant number of listed securities.
Under the proposal, a company that remains below $5 million in MVLS for 30 consecutive business days would receive a Staff Delisting Determination and would be immediately subject to suspension and delisting from Nasdaq. The company would not receive a standard cure or compliance period before that determination.
For comparison, a company on the New York Stock Exchange is subject to delisting review if its average global market cap falls below $15 million over a consecutive 30 trading-day period.
The proposed changes also would mean that a timely request for review by a Nasdaq Listing Qualifications Hearings Panel would not automatically stay a trading suspension for an MVLS deficiency. While a hearing is pending, the securities would generally trade in the over-the-counter market, according to the SEC’s July 22 order.
Nasdaq amended its original filing in June to provide the Hearings Panel with authority to grant an exception of up to 180 days from the Staff Delisting Determination. To receive that exception, a company would need to demonstrate that it meets all applicable initial-listing requirements, rather than only the continued-listing standards.
The SEC’s Division of Trading and Markets approved the proposal, as modified by Amendment No. 1, on July 22. The order found the rule consistent with provisions of the Securities Exchange Act of 1934 governing investor protection, fair procedures, and competition.
The SEC order said Nasdaq identified heightened susceptibility to manipulation and difficulty maintaining fair and orderly markets in securities with very low market values. The agency’s analysis of stock-price and delisting data covering 2006 through 2025 found that 65% of issuers that would have failed the proposed $5 million MVLS standard remained below that level 180 calendar days later. The median MVLS for those issuers after 180 days was below $3.7 million.
The analysis also found that, over the full sample period, 983 companies would have triggered the proposed rule by falling below $5 million in MVLS for 30 consecutive business days. Of those, 486 were categorized as expedited delistings because they were subsequently delisted, while 497 were categorized as false positives because they were never delisted during the analyzed period.
‘Make IPOs Great Again’: Will SEC review overturn the rule?
The SEC’s decision to review the rule is likely to be a welcome move to those opposed to the rule. Some critics believe that the Nasdaq rule could lead to increased delisting of microcap companies.
Ro Sokhi, founder & chief executive officer of Corviniti Accounting, said “something like 100 to 200 public-listed companies today currently fall below the threshold.”
“Critics argue that the commission has ostensibly made it their mantra to reinvigorate small business capital formation via the capital markets, reverse the trough in the number of public companies in recent decades, and to more broadly ‘make IPOs great again,'” Sokhi said. “Instead, this will undoubtedly reduce the number of public companies further and push companies to access private markets where there is less transparency and access available to retail investors.”
For example, in a comment letter dated February 19, the Small Public Company Coalition said “the rule would materially impair capital formation for small public companies—particularly those in the $5 million to $20 million valuation range. The risk that a temporary downtick in stock price could trigger immediate suspension and delisting would ‘discourage investors, particularly longer term and institutional investors, from purchasing small public companies’ stock.”
“The increased risk of delisting would make it significantly more difficult for such companies to attract and retain equity and debt financing,” the coalition added.
However, Sokhi said “others argue that this initiative is really a push to protect retail investors from lower quality companies or those that might be greatly distressed.”
“Companies in this market capitalization range a suffer from lower trading volumes, and these factors contribute to making them more susceptible to market manipulation, and hence the need for more investor protections,” he explained.
Senator Pete Ricketts (R-NE), who favors the rule, wrote to SEC Chairman Paul Atkins on July 15, saying it would “help protect American investors from increasingly sophisticated forms of fraud and reinforce the integrity of U.S. capital markets.”
He pointed out that Nasdaq’s proposal responds directly to a troubling trend in recent years. Promoters falsely present themselves as trusted advisers to attract retail investors, artificially drive up stock prices, and then sell their own shares for profit. Once they exit, the stock price crashes, leaving everyday investors with significant losses.
Ricketts said that many of these cases involve companies operating in China, where government influence over businesses and limitations on U.S. regulatory oversight make it harder to verify disclosures, obtain records, and enforce securities laws.
“The seriousness of this problem is evidenced by the significant attention it has received from regulators, market participants, and the press,” the senator wrote.
The SEC has repeatedly suspended trading in these companies, he pointed out. The Financial Industry Regulatory Authority (FINRA) has issued investor alerts and reviewed firms underwriting these offerings.
He said that this is not just about investor losses.
“When American savings are funneled into opaque entities beyond the practical reach of U.S. law and our markets become a venue that foreign adversaries can exploit with limited accountability, the harm extends to our economic and national security,” he said. “National securities exchanges play a critical gatekeeping role in U.S. capital markets, and investors reasonably assume that a company listed on a national exchange continues to satisfy meaningful minimum standards. Strengthening those standards is the most effective way to stop potential fraud at its source.”
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