Securities Law, NYSE, NASDAQ & OTC Markets Listings & Compliance

Navigating the Nasdaq Listing Process

Listing on Nasdaq is a major milestone for companies aiming to go public, offering access to global capital markets and increased visibility. However, the process is complex, requiring careful preparation and compliance with strict regulatory standards. This guide provides a clear roadmap, detailing essential steps, required filings, and practical insights to help your company achieve a successful listing.

Understanding the Nasdaq Listing Process

To list on Nasdaq, companies must meet specific financial, governance, and regulatory requirements. The process involves submitting a listing application, executing agreements, and providing detailed financial and operational disclosures. Nasdaq evaluates these materials to ensure compliance with its standards, which vary depending on the listing tier (Capital Market, Global Market, or Global Select Market).

Key Steps in the Listing Process

1. Eligibility Assessment: Confirm the company meets Nasdaq’s quantitative standards (e.g., shareholders’ equity, market value, or income requirements) and qualitative criteria (e.g., corporate governance).
2. Application Submission: Submit the Nasdaq listing application and agreement, along with supporting documentation.
3. Financial and SEC Filings: Provide audited financial statements and comply with U.S. Securities and Exchange Commission (SEC) reporting requirements.
4. Nasdaq Review: Nasdaq evaluates the application, potentially requesting additional information.
5. Approval and Listing: Once approved, the company executes the listing agreement and begins trading.

Required Documentation for Nasdaq Listing

Nasdaq Listing Agreement and Application

Companies must submit a signed Nasdaq listing agreement and a comprehensive listing application. At the time of listing, the company must certify compliance with Nasdaq’s listing criteria, including financial and governance standards. The application typically includes:

• Corporate details (e.g., business description, management bios).
• Financial data (e.g., audited statements, capitalization details).
• Evidence of compliance with Nasdaq’s governance rules, such as board independence and audit committee requirements.

Financial Statement Requirements

Nasdaq requires financial statements to be:

• Prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
• Reconciled to U.S. GAAP if prepared under local GAAP or non-IASB IFRS, with material variations disclosed.
• Audited by an independent auditor, accompanied by an audit report.

For initial public offerings (IPOs), the last audited financial year must not be older than 12 months at the time of filing. For non-IPO listings, this extends to 15 months. If the registration statement becomes effective more than nine months after the last audited financial year, interim financial statements may be required.

Additional Nasdaq Forms

In addition to the listing agreement and application, companies must submit:

• Corporate Governance Certification: Confirms adherence to Nasdaq’s governance rules or, for FPIs, compliance with home country practices.
• Logo Submission Form: For branding on Nasdaq’s market site and trading screens.
• Listing of Additional Shares Form: If additional shares are issued post-listing.
• Checklists and Exhibits: Specific to the company’s structure or listing tier.

Nasdaq may request further documentation, such as legal opinions or supplemental financial data, to evaluate the company’s eligibility or securities.

SEC Reporting Requirements

All SEC filings, including registration statements (e.g., Form S-1 for U.S. companies, Form F-1 or 20-F for FPIs), must be submitted to Nasdaq. These filings are made electronically via the SEC’s EDGAR system and become publicly available upon submission. Key components include:

• Consolidated Financial Statements: Covering the past three years, including balance sheets, income statements, statements of cash flows, changes in equity, and related notes.
• Management’s Discussion and Analysis (MD&A): Insights into financial condition and operational results.
• Capitalization and Indebtedness: A statement detailing the company’s capital structure.
• Use of Proceeds (for IPOs): Details on how funds raised will be utilized.
• Corporate Governance and Management: Information on board members, executive compensation, and internal controls.

For debt securities, companies must provide a ratio of earnings to fixed charges. All financial statements must comply with U.S. GAAP or IFRS, with explicit auditor certification for IFRS compliance.

Special Considerations for Foreign Private Issuers (FPIs)

FPIs, defined as non-U.S., non-governmental issuers, benefit from scaled-down requirements under U.S. securities laws. To qualify as an FPI, a company must meet one of these criteria:

• 50% or less of its voting securities are held by U.S. residents.
• If over 50% are held by U.S. residents, the company must not have:
  • A majority of U.S. citizen or resident executive officers or directors.
  • More than 50% of its assets in the U.S.
  • Business operations primarily in the U.S.

FPI-Specific Requirements

• SEC Registration: FPIs must file a Form 20-F to register securities or a Form F-1 for IPOs. Both forms require similar disclosures, including three years of audited financial statements, business details, and governance practices.
• Home Country Practice Exemption: FPIs may follow home country governance practices instead of Nasdaq’s rules. A written statement from independent counsel in the home country must certify that these practices are legal and disclose any non-compliance with Nasdaq rules.
• Confidential Filing Option: Under the JOBS Act, FPIs classified as emerging growth companies can submit initial registration statements confidentially, with amendments filed publicly via EDGAR.

Challenges for FPIs

Non-U.S. companies often find U.S. financial reporting standards, particularly GAAP reconciliation, challenging due to differences in local accounting practices. Additionally, restrictions on publicity during the SEC review process require careful communication strategies to avoid violations.

Additional Insights for a Successful Listing

Timing and Preparation

The Nasdaq listing process typically takes 4–6 weeks for review, assuming all documentation is complete. Companies should begin preparing at least 6–12 months in advance, particularly for SEC filings and audits. Engaging experienced legal and financial advisors familiar with Nasdaq and SEC requirements can streamline the process.

Corporate Governance

Nasdaq emphasizes strong governance, requiring independent board members, audit committees, and transparent executive compensation policies. FPIs opting for home country practices must clearly document exemptions to avoid delays.

Communication Restrictions

From the moment a company decides to pursue a U.S. public offering, it must limit public communications to avoid “gun-jumping” violations. This includes avoiding promotional materials or statements that could stimulate interest in the offering before SEC approval.

Post-Listing Obligations

Once listed, companies must maintain compliance with Nasdaq’s ongoing requirements, including:

• Timely filing of quarterly and annual reports.
• Disclosure of material events (e.g., changes in management, financial updates).
• Adherence to minimum share price and market value thresholds.

Failure to comply may result in delisting or additional reporting requirements.

Tips for a Smooth Nasdaq Listing

1. Start Early: Align financial statements with U.S. GAAP or IFRS well before applying.
2. Leverage Expertise: Work with auditors, legal counsel, and underwriters experienced in Nasdaq listings.
3. Understand Your Tier: Choose the appropriate Nasdaq tier based on your company’s size and goals.
4. Plan for Governance: Ensure your board and policies meet Nasdaq’s standards or secure exemptions for FPIs.
5. Monitor Communications: Train your team to comply with SEC publicity restrictions during the offering process.

Conclusion

Listing on Nasdaq is a transformative step. By understanding the application process, preparing thorough documentation, and addressing regulatory nuances—especially for FPIs—companies can navigate the process efficiently. With careful planning and expert guidance, your company can successfully join the ranks of Nasdaq-listed innovators.

If you have questions about going public on the NASDAQ or need to hire a securities attorney, Hamilton & Associates Law Group, P.A. is ready to assist you. Our Founder, Brenda Hamilton, is a nationally known and recognized securities attorney with over two decades of experience assisting issuers worldwide with going public on the Nasdaq, NYSE, and OTC Markets. Since 1998, Brenda Hamilton has been a leading voice in corporate and securities law, representing both domestic and international clients across diverse industries and jurisdictions. Whether you are taking your company public, raising capital, navigating regulatory challenges, or entering new markets, Brenda Hamilton and her team deliver the experience, strategic insight, and results-driven representation you need to succeed.

To speak with a Securities Attorney about Nasdaq Stock Exchange listing, Corporate Governance or Nasdaq Compliance matters, please contact us at (561) 416-8956, or by email at [email protected].

Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
200 E Palmetto Rd, Suite 103
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com