Uplisting to Nasdaq: When “Helping” the Stock Price Becomes Market Manipulation Nasdaq Uplisting: Risks, Market Manipulation & SEC Rules

Nasdaq Uplisting Requirements, Undisclosed Lockups, Manufactured Public Float, Matched Trading and Misleading Listing Applications

An uplisting from the OTC Markets to the Nasdaq Capital Market can transform a small public company, but the Nasdaq uplisting process creates serious securities-law risks when an issuer tries to manufacture the stock price, public float, shareholder count or trading volume needed for listing. A Nasdaq listing may improve visibility, liquidity, analyst attention, institutional access and the company’s ability to raise capital. It can also place enormous pressure on management when the company does not naturally satisfy Nasdaq’s initial listing requirements.

That pressure can produce a dangerous misconception: that management, insiders, consultants, shareholders, lawyers or brokers may take steps to “help” the stock qualify. An issuer may ask shareholders not to sell, delay legend removals, arrange friendly purchases, recruit accommodation shareholders, coordinate trades near the close or provide Nasdaq with an aggressively favorable description of its float and shareholder base. Those actions are not harmless capital-markets tactics. Depending on the facts, they may constitute market manipulation, securities fraud, unregistered distributions, broker-dealer violations or criminal conduct.

Companies moving from the OTC market are particularly vulnerable because their officers and directors often have little experience with national-exchange listing reviews, and because they rely heavily on promoters, consultants, investment bankers, transfer agents and other gatekeepers. But an uplisting application is not a marketing presentation. Nasdaq relies on the issuer’s representations and supporting records to determine whether the company has a genuine, unrestricted and orderly public market. Padding the application or manufacturing the underlying facts can jeopardize the listing and expose the participants to SEC and Department of Justice enforcement.

Two bodies of material bear directly on this subject and are rarely read together: Nasdaq’s listing rules, amended repeatedly since 2019 and again in 2025 and 2026, and a line of SEC and DOJ enforcement actions in which the purpose of the misconduct was to obtain or preserve a Nasdaq listing. This article reads them together, identifies the statutory provisions actually in play, and considers whether Nasdaq’s recent rulemaking is aimed at the right target.

Why This Matters Now

Three developments have changed the environment for uplisting applicants in the space of a year.

First, the SEC suspended trading under Section 12(k) of the Exchange Act in a series of recently listed small-capitalization companies during the second half of 2025. The suspension orders frequently cited concerns that unknown or unaffiliated third parties — in several instances through social-media promotion — were driving price and volume in securities that had cleared every listing requirement.¹

Second, Nasdaq tightened its numerical standards twice. Amendments operative in April 2025 changed how Nasdaq counts shares in certain offering-related listings: shares registered for resale do not count toward the applicable Unrestricted Publicly Held Shares requirement, and a company listing in connection with an initial public offering must satisfy the market-value test from offering proceeds. In December 2025, the Commission approved an increase in the minimum Market Value of Unrestricted Publicly Held Shares under the Net Income Standard from $5 million to $15 million, so that all three principal Nasdaq Capital Market financial standards now carry the same $15 million requirement.

Third, and most consequentially for how applications are reviewed, Nasdaq adopted Listing Rule IM-5101-3, effective December 19, 2025². The rule allows Nasdaq to deny an initial listing to a company that satisfies every quantitative and qualitative requirement, based on factors that make the security susceptible to manipulation — including factors relating to the company’s advisors. That change is discussed at length below, because it substantially answers a criticism this article would otherwise have made.

The practical consequence is that a listing application filed today is reviewed against a materially more skeptical baseline than one filed two years ago, and the exchange now has express authority to say no to an applicant whose numbers all work.

Nasdaq Capital Market Requirements Create Pressure Points

A company applying to list its primary equity security on the Nasdaq Capital Market must satisfy the general requirements in Nasdaq Listing Rule 5505(a) and at least one of the financial standards in Rule 5505(b)³. The general requirements include at least 1,000,000 unrestricted publicly held shares, at least 300 round-lot holders, and at least three registered and active market makers. At least half of the required minimum number of round-lot holders — that is, 150 — must each hold unrestricted securities with a market value of at least $2,500. The requirement is measured against the minimum, not against however many holders the company happens to have.⁴

An issuer whose security trades over the counter at the time of application generally must also demonstrate average daily trading volume of at least 2,000 shares over the 30 trading days before listing, with trading on more than half of those days. An exception applies when the security is listed in connection with a firm-commitment underwritten public offering of at least $5 million and the applicable market-value requirement is satisfied from the offering proceeds.⁵

Since December 2025, each Nasdaq Capital Market financial standard requires at least $15 million in market value of unrestricted publicly held shares. This is a recent change and a significant one for issuers that had planned around the Net Income Standard, where the threshold was $5 million until the Commission approved Nasdaq’s proposal, as modified by Amendment No. 1, in December 2025⁶. Depending on the standard used, the issuer must also satisfy requirements involving stockholders’ equity, operating history, market value of listed securities or net income.

Nasdaq also imposes a price requirement under Rule 5505(a). Although alternative price pathways may be available in some circumstances, many OTC issuers focus on achieving and maintaining a price of $4.00, $3.00 or $2.00, depending on the applicable rule and the issuer’s financial profile.⁷

These standards are intended to demonstrate that the company has a real public market capable of supporting price discovery and orderly trading. They are not merely boxes to be checked. The shares counted as unrestricted public float must actually be unrestricted; the holders must be genuine holders; the price must result from bona fide trading; and the volume must reflect actual market activity rather than transactions organized to satisfy a listing metric.

What Counts as Unrestricted Public Float?

Public float is not simply the number of shares held by persons whose names do not appear on the officer-and-director list. Nasdaq excludes shares held directly or indirectly by officers, directors and beneficial owners of more than 10% of the company’s outstanding shares from publicly held shares. Shares subject to resale restrictions, lockups or similar limitations are not unrestricted securities.⁸

A transfer agent’s shareholder list may show record ownership, but record ownership does not always establish beneficial ownership or independence. Multiple holders may be controlled by the same person, funded by an insider, subject to side agreements or acting as nominees. Nasdaq may request transfer-agent lists, Cede & Co. information, broker searches, Broadridge share-range analyses, NOBO lists and other data to determine whether the round-lot and public-float requirements are actually met.

Market value of unrestricted publicly held shares is generally calculated by multiplying the qualifying unrestricted public shares by the applicable closing or bid price. That arithmetic creates an obvious temptation: reduce the supply of shares that can be sold, push the trading price higher, or characterize questionable shares as unrestricted. Each of those responses can create serious problems.

What Law Is Actually Being Violated

Discussions of this subject often describe conduct as “manipulation” without identifying the provisions in play. That is a mistake, because the provisions have different elements, different scienter requirements and different reach, and the differences matter to how a matter is charged and defended.

Exchange Act Section 9(a)

Section 9(a)(1) reaches wash sales and matched orders entered to create a false or misleading appearance of active trading. Section 9(a)(2) reaches transactions that create actual or apparent active trading for the purpose of inducing others to buy or sell.⁹

Section 9 historically applied only to securities registered on a national securities exchange, which placed OTC-quoted issuers largely outside it. Section 929L of the Dodd-Frank Act removed that exchange-registration limitation and broadened the provision’s reach. The practical significance for an uplisting candidate is direct: a company whose stock is still quoted over the counter while the closing price is being managed toward a listing threshold cannot assume it sits outside Section 9. The SEC charged Section 9(a) in the Abakan matter, where the security was quoted on the OTC market throughout the relevant period.

Why, then, does Section 10(b) carry most of the weight in these cases? Because Section 9(a)(2) requires proof that the transactions were effected for the purpose of inducing others to buy or sell — a heavier burden than Rule 10b-5’s scienter standard — and because the express private right of action in Section 9(f) carries willfulness, reliance and damages requirements and a short limitation period that make it unattractive to plaintiffs. The pattern across the reported matters is consistent: the Commission pleads Section 10(b) and Rule 10b-5(a) and (c) in every case, and adds Section 9(a) where the trading records are clean enough to carry the additional element. Abakan is the example.¹⁰

Exchange Act Section 10(b) and Rule 10b-5

Rule 10b-5(a) and (c) — scheme liability — do most of the work in these cases. Both the CyberDefender and Longfin actions were framed around subsections (a) and (c) rather than (b), because the wrong alleged was a course of conduct rather than a discrete false statement. Counsel who analyze these matters only as disclosure problems will misjudge them.¹¹

Securities Act Sections 17(a) and 5

Section 17(a)(1) and (3) reach fraud in the offer or sale of securities and were charged in CyberDefender.¹² Section 5 is the provision practitioners most often overlook. Listing-driven schemes routinely involve unregistered distributions: shares placed with accommodation holders, nominees, consultants or promoters without a valid exemption. Section 5 was charged in both the Abakan and Longfin-related matters. It imposes strict liability, requires no showing of scienter, and is frequently the easiest count for the Commission to prove.¹³

The criminal provisions

Federal prosecutors typically proceed under 18 U.S.C. § 1348 (securities fraud) and § 371 (conspiracy), often together with the mail and wire fraud statutes. Adam Gottbetter, discussed below, pleaded guilty to conspiracy to commit securities and mail fraud.¹⁴

What makes a false statement to Nasdaq unlawful?

This point is worth understanding precisely, because it is frequently stated loosely. Nasdaq is a self-regulatory organization, not a federal department or agency. Section 1001 of Title 18 — the general false-statements statute — does not by its terms reach statements made to Nasdaq. Lying to the exchange is not, standing alone, a federal crime in the way that lying to the SEC or the FBI is.¹⁵

The theory in the Longfin action was different. The misrepresentations to Nasdaq were alleged to be part of a scheme to obtain a listing, and the listing was the mechanism by which the securities reached public investors. That brings the conduct within the “in connection with the purchase or sale” element of Section 10(b) and the “in the offer or sale” element of Section 17(a).¹⁶

Two practical consequences follow. First, the analysis turns on the relationship between the misstatement and investor trading, not on the misstatement in isolation. Second, the evidence that supplies that relationship is usually internal and mundane: financing timelines, investor communications, warrant-exercise plans, board materials describing what the listing will make possible. Companies that carefully police their public statements while leaving that record unexamined have protected the wrong flank.

FINRA and exchange rules

FINRA Rule 5210 prohibits a member from publishing or circulating any transaction report or quotation that the member does not believe to be bona fide, and Rule 2010 imposes standards of commercial honor and just and equitable principles of trade.¹⁷ A broker who accepts an instruction to close a stock above a specified price has a problem under those rules independent of the federal securities laws.¹⁸ Nasdaq Rule 5101 and its interpretive material supply the exchange’s own authority, discussed below.¹⁹

Undisclosed Lockups and Informal Selling Restrictions

A properly documented and disclosed lockup may be entirely legitimate. Underwriters commonly require lockups in connection with public offerings, and issuers may enter into contractual restrictions for valid business reasons. But shares subject to those restrictions generally cannot be represented to Nasdaq as unrestricted public float.

The greater danger is an informal or concealed arrangement intended to keep shares off the market while the company seeks to establish the required price or float. The arrangement may never be labeled a lockup. It may be described as a favor, a request for patience, a condition of continued cooperation or an understanding that a holder should not “hurt the uplisting.” Substance matters more than terminology, and an oral understanding restricts shares just as effectively as a signed agreement.

Asking shareholders not to sell until Nasdaq approves the application;
Threatening to withhold corporate cooperation, information or future opportunities if a holder sells;
Directing a transfer agent to impose or maintain a stop-transfer instruction, or to delay a legend removal, without a valid legal basis;
Conditioning participation in a financing or transaction on an undisclosed agreement not to sell;
Requesting that holders withdraw sell orders or refrain from depositing shares; and
Counting shares as unrestricted while management is actively preventing those shares from reaching the market.

A pending Nasdaq application does not itself authorize an issuer or transfer agent to restrict otherwise lawful transfers. When the company represents to Nasdaq that shares are freely tradable while simultaneously preventing sales, the problem is not limited to the stockholder dispute. The restriction may distort the trading market and render the company’s Nasdaq submissions misleading.

Padding the Nasdaq Application

Small issuers sometimes approach the Nasdaq application as if it were an investor presentation in which favorable facts may be highlighted and complications minimized. That approach is fundamentally mistaken. Nasdaq’s listing review is a regulatory process conducted by a self-regulatory organization with investor-protection responsibilities and broad discretionary authority.

Padding may involve an express false statement, but it may also involve a technically accurate statement made misleading by omitted facts. An issuer may accurately report that five million shares are held by nonaffiliates, yet omit that two million shares are subject to undisclosed lockups, one million are held by nominees for a controlling shareholder and certain holders were reimbursed for their purchases. Nasdaq needs the economic reality, not merely the surface arithmetic.

Counting locked-up or informally restricted shares as unrestricted public float;
Failing to disclose stop-transfer instructions or delayed legend removals;
Counting nominees, accommodation holders or commonly controlled accounts as independent investors;
Misstating how much cash was received in an offering, or whether investors actually paid for their shares;
Failing to identify relationships among holders, management, promoters, consultants and financing sources;
Providing an incomplete explanation for unusual price increases, end-of-day trades or concentrated volume; and
Submitting certifications or supporting records that conflict with SEC filings, transfer-agent records, DTC information or brokerage data.

Matched Trades, Wash Trades and Marking the Close

Matched trading occurs when a purchase or sale order is entered with knowledge that a substantially corresponding order will be entered by another person. A wash trade creates the appearance of trading activity without a meaningful change in beneficial ownership. “Marking the close” generally refers to transactions placed at or near the market close for the purpose of influencing the reported closing price. Each is addressed directly by Section 9(a) as well as by Section 10(b).

These practices are particularly dangerous during an uplisting because Nasdaq’s price and trading-history requirements can turn the final trade of the day into a regulatory data point. Small end-of-day purchases may seem economically insignificant, but a repeated pattern designed to establish a qualifying closing price is powerful evidence of manipulative intent — and, as the cases below show, the pattern is visible in trading records long after the participants have forgotten it.

Two related accounts buying and selling the same number of shares at approximately the same time and price;
An insider arranging for one friendly shareholder to sell while another buys;
Repeated small purchases near the close when the stock is near a Nasdaq price threshold;
Instructions to brokers or shareholders to close the stock above a specified price;
Trading among nominee or controlled accounts to build a chart or demonstrate liquidity; and
Purchases funded directly or indirectly by the issuer, an insider or a transaction participant.

The Abakan complaint discussed below is a useful map of how such conduct is charged. A single course of end-of-day trading undertaken to reach a listing threshold was alleged to violate the registration provisions of the Securities Act, the general antifraud provisions of both Acts, the specific manipulation provision of the Exchange Act and — as to one defendant — the statutory associational bar.²⁰ Counsel who analyze conduct of this kind under Rule 10b-5 alone are seeing a fraction of the exposure.

Enforcement: Conduct Undertaken to Obtain a Listing

CyberDefender: Marking the Close by an Outside Trader

The SEC’s case against Michael J. Ling is the clearest available illustration of listing-driven closing-price manipulation — and its first lesson is structural. Ling was a New Jersey day-trader. He was not an officer, director or employee of CyberDefender Corp., and the Commission did not charge the issuer. Liability for manipulation undertaken to obtain a listing does not track the corporate organization chart.²¹

The SEC alleged that Ling repeatedly marked the close and entered matched trades in CyberDefender stock between September 2009 and June 2010 to maintain the price at or above $4.00. According to the complaint, over 144 trading days Ling traded on 127; on 54 of those days he traded in the final fifteen minutes; on 48 days he was the last trade of the day and thus set the closing price; and he entered 23 matched trades coordinated with an acquaintance. The Commission alleged he profited by more than $650,000, principally by exercising warrants received at bargain prices. The final judgment, entered in December 2015, required payment of $554,005.98 — $454,005.98 in disgorgement and prejudgment interest plus a $100,000 civil penalty — and permanently enjoined him under Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5.²²

One caution about reading this case forward. The prerequisite at issue was a closing bid price of $4.00 or higher for 90 consecutive trading days, which reflects Nasdaq’s requirements as they stood in 2009 and 2010. The current price requirement is framed differently.²³ What survives the rule changes is the analysis, not the arithmetic: maintaining a qualifying price through coordinated trading does not become lawful because the purpose is to obtain a national-exchange listing. If anything, the intended Nasdaq benefit establishes why the price mattered and why the trading occurred.

Abakan: Consultants, Registered Representatives, and a Misread Rule

The SEC charged three former registered representatives — Richard P. Cedrone, Steven R. Ferris and George R. Thoreson — with coordinating manipulative trading, including marking the close, to enable Abakan, Inc. to meet Nasdaq’s price requirement. Cedrone and Ferris were serving as investor-relations consultants to the company. The alleged scheme ran from approximately April 2012 through September 2013 and aimed at a closing price of $2.00 or better for 90 consecutive trading days.²⁴

Several details make the matter instructive. Thoreson effected the majority of the trading, ultimately accumulating 629,675 shares in his personal accounts at a cost exceeding $1.3 million, and made real-time admissions by email that he had just marked the close — admissions corroborated by the trading records. The three initially misunderstood the requirement as 90 calendar days rather than 90 trading days. The manipulation failed; Abakan never obtained the listing.

The charges spanned Securities Act Sections 5 and 17(a) and Exchange Act Sections 9(a), 10(b) and, as to Cedrone, 15(b)(6)(B)(i).²⁵ The settlements included an injunction prohibiting each defendant from placing orders to buy or sell securities during the last 60 minutes of any trading day — a remedy tailored precisely to the violation. Cedrone paid $5,013 in disgorgement plus prejudgment interest and a $150,000 penalty, elevated because he had violated a prior Commission order; Thoreson paid a $75,000 penalty and accepted industry and penny-stock bars; determination of Ferris’s penalty was deferred pending completion of his cooperation.²⁶

Two lessons. First, failure is not a defense. The listing was never obtained and the charges came anyway; the offense is the conduct, not the result. Second, note the Section 5 count — the scheme was funded in part by unregistered sales of the same issuer’s stock, with the proceeds used to pay the company’s bills. Manipulation and unregistered distribution travel together far more often than not.

Longfin: Fabricating the Shareholder Base and the Offering

Longfin Corp. remains the leading example of padding the non-price components of a Nasdaq application. The SEC alleged that Longfin and its chief executive, Venkata S. Meenavalli, obtained qualification for a Regulation A+ offering²⁷ by falsely representing in SEC filings that the company was principally managed and operated in the United States when its operations, assets and management remained offshore. They then allegedly distributed more than 400,000 free shares to insiders and affiliates who paid nothing, creating the appearance that the company had completed a bona fide public offering and satisfied Nasdaq’s listing criteria.²⁸

Longfin, Meenavalli and a consultant, Andy Altahawi, were alleged to have misrepresented to Nasdaq the number of qualifying shareholders and the number of shares sold in the offering. The Commission separately alleged that the company recorded more than $66 million in fictitious revenue from sham commodities transactions, amounting to the overwhelming majority of its reported 2017 revenue. Longfin voluntarily delisted from Nasdaq in May 2018 and ceased operations in November 2018. A parallel criminal action was brought by the U.S. Attorney’s Office for the District of New Jersey.

The monetary outcomes are worth stating precisely, because they are frequently aggregated incorrectly. In the fraud action, the court entered a default judgment against Longfin in September 2019 totaling $6,775,848 — $3,532,235 in disgorgement and prejudgment interest, plus a $3,243,613 civil penalty. Meenavalli settled in January 2020 for $400,000, comprising disgorgement of his entire salary as chief executive ($159,000), $9,000 in prejudgment interest and a $232,000 penalty, together with surrender of all his Longfin stock, a permanent officer-and-director bar and a penny-stock injunction. Altahawi’s proposed settlement required him to return $21 million, pay a $2.9 million penalty, surrender all his Longfin shares and accept a five-year officer-and-director bar and an industry bar. A separate action concerning unregistered distributions produced a preliminary injunction freezing more than $27 million and, in June 2019, judgments exceeding $26 million against three affiliated individuals. Two cases, two theories; the figures should not be combined.

Longfin demonstrates why Nasdaq must look beyond a capitalization table or transfer-agent list. The critical questions are who paid for the shares, whether the money remained with the issuer, whether the holders were affiliates or nominees, and whether the distribution created genuine public ownership. None of those questions is answered by a share count.

New York Global Group: The Round-Lot Allegations and Their Undoing

No published enforcement matter squarely adjudicates manufactured round-lot holders. The closest the record comes is the 2015 prosecution of Benjamin Wey, founder of New York Global Group, in the Southern District of New York, together with a parallel SEC action — and the way that matter ended is as instructive as the allegations themselves.

The indictment alleged that Wey used nominees to acquire substantial positions in OTC-quoted shell companies, facilitated reverse mergers between those shells and China-based operating companies, and then caused several of the resulting issuers — including SmartHeat, Deer Consumer Products and CleanTech Innovations — to apply for Nasdaq listings.²⁹ To secure approval, the government alleged, Wey engaged in deception to artificially satisfy the 300 round-lot shareholder requirement: deceptive transfers of shares from nominees to confederates, and issuances of round-lot blocks of 100 to 300 shares in the names of individuals who never actually received them or were unaware they owned them. The theory rested on the premise that Nasdaq does not generally count gifted shares toward the shareholder minimum, because a gift does not establish the trading interest the requirement exists to demonstrate.³⁰

That is the clearest articulation available of what “manufactured round-lot holders” means in practice. It is also an allegation that was never tested. In August 2017 the district court suppressed evidence seized under search warrants it found impermissibly broad, and the charges against Wey were dismissed. United States v. Wey, 256 F. Supp. 3d 355 (S.D.N.Y. 2017)³¹. The following month the SEC voluntarily dismissed its claims against Wey, New York Global Group and the other defendants, stating that it had relied on evidence suppressed in the criminal proceeding.³² Wey subsequently brought litigation against Nasdaq and FINRA concerning their roles in the investigation.

Two lessons follow, and they point in opposite directions. For issuers and their advisors: the government’s theory of round-lot fabrication remains on the record and nothing in the dismissal disturbed it. The case failed on the Fourth Amendment, not on the securities analysis, and a differently gathered record would have presented the same theory. For the policy discussion below: the exchange’s role in these matters is not passive. Nasdaq and FINRA supply information that criminal and civil authorities act upon, and the accuracy of that information matters. An argument that Nasdaq should conduct more diligence is necessarily also an argument that Nasdaq should be careful, and accountable, in what it concludes.

Lawyers, Broker-Dealers and Other Gatekeepers Can Be Charged

An issuer should never assume that conduct is lawful because it was suggested or facilitated by a lawyer, broker, investment banker, promoter or investor-relations consultant. Enforcement history contains numerous examples of gatekeepers becoming participants — and, as IM-5101-3 now makes explicit, the identity and history of a company’s advisors has become a listing consideration in its own right.

Adam Gottbetter: Securities Lawyer and Broker-Dealer Owner

Adam S. Gottbetter was a corporate and securities lawyer who marketed himself as an expert in taking private companies public and owned a registered broker-dealer. The SEC alleged that he used his New York law office as the headquarters for planning and implementing market-manipulation schemes, orchestrating promotional campaigns that touted microcap companies and enticed investors to buy at inflated prices so that he and his associates could sell shares they controlled. Two Canadian promoters, Mitchell G. Adam and K. David Stevenson, were charged as participants in the last of three schemes conducted over a six-year period.³³

The Department of Justice reported that Gottbetter instructed a cooperating witness to create volume and “build a chart,” and contemplated using numerous nominee brokerage accounts and an automated trading system to create the appearance of market activity. He pleaded guilty to conspiracy to commit securities and mail fraud and was sentenced to 18 months in prison, fined $60,000 and ordered to forfeit $344,967; DOJ also reported that he forfeited more than $4.5 million to the SEC.³⁴

The case is not an uplisting prosecution, but it is directly relevant to the uplisting environment. A lawyer’s involvement, legal terminology or formal transaction documents do not legitimize a scheme whose economic purpose is to create artificial price or volume. The phrase “build a chart” describes the conduct with more candor than most enforcement records manage.

ForceField Energy: Registered Brokers, Nominees and Secret Compensation

The ForceField Energy prosecutions involved a Nasdaq-listed company and a broad network of promoters, investor-relations personnel and registered brokers. DOJ described a scheme that artificially controlled ForceField’s price and volume through nominee accounts, orchestrated trading and concealed payments to promoters and broker-dealers who claimed to be independent. Several registered brokers pleaded guilty or were convicted. DOJ alleged that a ForceField executive paid secret commissions or kickbacks to brokers in exchange for purchasing ForceField stock in customer accounts, and put investor losses at approximately $131 million.³⁵

ForceField shows why an issuer cannot treat broker involvement as proof of independence. Where a broker’s purchases are secretly compensated, coordinated or directed by the issuer or its agents, the resulting activity may create a false appearance of genuine demand — and the customers whose accounts were used become victims rather than evidence of market interest.

San Diego Lawyers and an Offshore Broker-Dealer

In another microcap case, the SEC charged two San Diego attorneys, Canadian promoters, a Bahamas-based broker-dealer and others in an international pump-and-dump scheme, alleging that the participants used false promotions, offshore structures and concealed stock ownership to distribute shares into the market. Although that action did not center on a Nasdaq uplisting, it illustrates the role that legal opinions, offshore accounts and nominal ownership structures can play in a broader manipulation scheme. Counsel must independently evaluate facts rather than merely papering a transaction designed by promoters or controlling shareholders.³⁶

Other Conduct That Can Cross the Line

Coordinated Buying and Bid Support

Management may believe it is permissible to ask friends, employees, consultants or existing shareholders to buy stock because each purchaser is paying cash. The analysis does not end there. Purchases become problematic when participants agree to maintain a target price, support a bid, buy whenever the price declines, coordinate the timing or amount of purchases, or hold the shares temporarily until the listing is effective.

The same concern arises when the issuer supplies funds through loans, consulting payments, reimbursements or other arrangements. A transaction that appears to be an independent open-market purchase may be misleading if the economic risk is borne by the issuer or an insider. The test is not who signed the order ticket; it is who bore the risk.

Artificial Round-Lot Holders

Nasdaq’s round-lot requirement is intended to demonstrate a meaningful public shareholder base. It should not be satisfied by distributing shares to friends, relatives, employees, consultants or nominal holders who lack genuine investment intent — the conduct alleged, though never adjudicated, in the New York Global Group matter discussed above.

Red flags include holders who are reimbursed for the purchase price, protected against loss, required to return the shares after listing, controlled by another person, or prohibited from selling without management approval. A list of 300 account names is not equivalent to 300 independent investors, and Nasdaq is now expressly authorized to look behind the list.

Transfer-Agent Interference

A transfer agent should not be used as a stock-price-control mechanism. An issuer may have legitimate reasons to question a transfer or seek additional documentation, but it should not direct the transfer agent to delay otherwise valid legend removals³⁷ or transfers merely because management fears that sales will reduce the price or public-float value.

The legal obligation runs the other way. Under Article 8 of the Uniform Commercial Code, an issuer generally has a duty to register a transfer presented with the required endorsement, documentation and reasonable assurances; U.C.C. Section 8-407 generally imposes corresponding duties on a transfer agent acting for the issuer. A refusal or unreasonable delay without a legal basis can support statutory and, depending on governing law and the facts, common-law claims. Transfer agents are separately regulated: they register with the Commission under Exchange Act Section 17A and are subject to the Rule 17Ad-series processing and turnaround requirements. A transfer agent that delays at an issuer’s direction without a legal basis is not merely accommodating a client.

When a company simultaneously represents that shares are unrestricted and directs the transfer agent to prevent those shares from trading, the inconsistency may become evidence that the represented float was not genuine. The two positions cannot both be true, and the company has committed to one of them in writing.

Regulation M and Offering-Period Purchases

Uplistings frequently occur alongside a registered offering, resale registration statement or other distribution. Regulation M restricts bids and purchases during an applicable restricted period: Rule 101 applies to distribution participants and their affiliated purchasers, and Rule 102 applies to issuers and selling security holders. Rule 104 governs stabilization, which is permitted only at prescribed prices, by a designated person, and subject to disclosure and notification requirements.³⁸ It is not a general license to support the market.³⁹

The restricted period is generally one business day before pricing for a security with an average daily trading volume of at least $100,000 whose issuer has a public float of at least $25 million, and five business days before pricing for everything else.⁴⁰ That structure carries a trap small issuers regularly miss: the thresholds sit at levels a thinly traded OTC company will not reach, so the longer restricted period is the one that applies to precisely the issuers most tempted to support their own market.

The same asymmetry runs through the exceptions. Rule 101 excepts actively traded securities — those with average daily trading volume of at least $1 million whose issuer has a public float of at least $150 million — but most small OTC uplisting candidates will not qualify. Rule 102 contains no parallel exception at all, so the issuer’s own purchases, and those of its selling shareholders, remain constrained even where a distribution participant’s would not be. The accommodations built into Regulation M for liquid securities are, by design, unavailable to the companies this article concerns.

Before any officer, director, affiliate, selling shareholder, consultant or financing participant trades during an offering, counsel should perform the Regulation M analysis in writing. An issuer should not assume the rule is irrelevant merely because the financing is not described as a conventional IPO.

Treat the Application and Nasdaq Responses as Regulatory Submissions

The Nasdaq application, supplemental questionnaires, certifications and responses to staff inquiries should receive the same level of care as SEC filings. Management should verify the underlying facts rather than relying blindly on consultants or transaction participants.

Information provided privately to Nasdaq should be consistent with the company’s SEC reports, offering documents, beneficial-ownership filings, transfer-agent records, capitalization tables, DTC records, board minutes, lockup agreements and public statements. Inconsistencies are frequently more damaging than a candid disclosure of a temporary deficiency — a deficiency invites a question, while an inconsistency invites an investigation.

Identify the beneficial owner and source of funds for each material holder counted toward the listing standards;
Confirm that every share included in unrestricted public float is genuinely free from contractual, legal and informal resale restrictions;
Review all written and oral lockups, side letters, voting agreements, repurchase arrangements and understandings not to sell;
Determine whether the issuer or transfer agent has delayed any transfer, deposit or legend removal, and why;
Analyze recent trading for concentration, matched orders, wash trades, repetitive closing activity or coordinated purchases;
Reconcile Nasdaq submissions with SEC filings, transfer-agent records, DTC data and brokerage information; and
Review compensation paid to brokers, finders, consultants, promoters and investor-relations firms.

What Lawful Cure Actually Looks Like

This article has so far catalogued what a company cannot do. The harder and more useful question is what it can. There is no single answer, but the lawful paths share a common feature: they change the company’s actual capital structure or shareholder base, rather than the description of it.

Raise real money. A firm-commitment underwritten offering is the most direct route to the market-value and price requirements, and the public offering alternative exists precisely for companies whose OTC trading history will not carry them. The cost is dilution — which is the point. The requirement is designed to be expensive, and paying it is the compliant response.

Reverse splits, carefully. A reverse split can address a bid-price deficiency but does nothing for float value, and it reduces the share count available to satisfy the publicly held shares test. Nasdaq has separately tightened its treatment of issuers that reverse split repeatedly.⁴¹ A split undertaken solely to clear a price threshold, with no financing behind it, frequently trades back down before the application is decided.

Understand what a resale registration will and will not do. Since April 2025, shares registered for resale do not count toward the applicable Unrestricted Publicly Held Shares requirement in the offering-related listing circumstances addressed by the amended rule. A resale registration statement therefore cannot be assumed to supply the required market-value figure, and plans built on the older rule must be revisited under the company’s specific listing pathway.

Place stock with investors who actually bear risk. A placement to unaffiliated institutions that pay cash, take market risk and are free to sell creates genuine float. One structured with side letters, repurchase understandings or downside protection does not — and the side letter is precisely the document a Nasdaq analyst, or later an examiner, will ask to see.

Consider waiting. A company that is close but not there may be far better served by waiting two quarters than by closing the gap artificially. A deficiency is temporary and curable. An enforcement record is neither.

Has Nasdaq’s Response Been the Right One?

Nasdaq has responded to concerns involving low-float and thinly traded companies on two tracks: raising numerical listing standards, and expanding its discretionary authority to refuse an application. The second track deserves more attention than it has received, because it substantially answers the criticism most often made of the first.

What Nasdaq has already done

Effective December 19, 2025, Listing Rule IM-5101-3 permits Nasdaq to deny an initial listing based on factors that make a company’s securities susceptible to manipulation — even where the applicant satisfies every quantitative and qualitative listing requirement.⁴³ The rule sets out non-exclusive factors, none dispositive standing alone. They include considerations relating to the company’s advisors, expressly encompassing auditors, underwriters, law firms, brokers, clearing firms and other professional service providers: whether an advisor has been reviewed by regulators and with what result; whether a newly formed advisory firm’s principals were involved with other firms carrying a regulatory history; and whether an advisor participated in prior transactions in which the securities later exhibited concerning trading. Further factors address whether the expected public float and dissemination of the share distribution — assessed through underwriter, broker and clearing allocations and prior deals involving those providers — raise concerns about liquidity and concentration; whether foreign law would impair regulatory recourse or diligence; and whether management and the board have experience with U.S. public markets.⁴⁴

A denial under the rule requires a written determination, is appealable to a Nasdaq hearings panel, and must be publicly announced by the company in a Regulation FD-compliant manner within four business days.⁴⁵

The backdrop was specific. Nasdaq cited a series of SEC trading suspensions under Exchange Act Section 12(k) in recently listed companies, frequently premised on concerns that unknown or unaffiliated third parties were driving price and volume, in several instances through social-media promotion.⁴⁶ Nasdaq also observed that NYSE and NYSE American already screen applicants through pre-review processes before an application is accepted.⁴⁷

The case for the numerical approach

The argument for higher thresholds deserves a fair statement, because it is stronger than its critics usually allow. Nasdaq’s position is not simply that bigger is safer. It is that companies clearing a $15 million float threshold have empirically proven less likely to experience the problematic trading the exchange has observed, and that a larger genuine float is materially harder and more expensive to corner. There is real force in this. A manipulator who must place $15 million of stock with paying holders rather than $5 million needs more accounts, more funding and more participants — and every addition is a further point of detection and a further potential witness.

Thresholds also have an institutional virtue that discretionary review lacks: they are administrable. They can be applied consistently, prospectively and without hindsight, and they do not expose the exchange to the charge that it is selecting winners or punishing applicants for the company they keep.

Where the numerical approach falls short

The objection is not that thresholds are useless. It is that they are poorly targeted — they impose a certain cost on every legitimate applicant in order to impose an uncertain cost on the dishonest one.

The enforcement record supports the point. Longfin’s problem was not the size of its float; it was that the shares were given away to people who never paid for them. CyberDefender and Abakan were not float cases at all; the misconduct was in the closing print. The round-lot allegations in the New York Global Group matter concerned who the holders were, not how many dollars they represented. None of these matters would have been prevented by a higher dollar threshold, and three of the four involved conduct that leaves a detectable trace in trading and payment records. Meanwhile, legitimate domestic small businesses bear the cost of the higher bar through greater dilution, larger offerings, higher underwriting expense and delayed access to a national market.

What targeted diligence still does not reach

IM-5101-3 addresses advisors, distribution and jurisdiction. On its face it does not reach several measures that would bear directly on the conduct described in this article:

Proof of payment for qualifying shares. Bank, escrow and brokerage records confirming that investors actually paid for shares included in the public-float and holder calculations. This is the single measure that would have caught Longfin.
Source-of-funds review. Whether counted investors received loans, reimbursements, consulting payments, guarantees or repurchase assurances from the issuer or its affiliates.
Comprehensive transfer-restriction certification. A certification from the issuer, transfer agent, principal underwriter and counsel identifying every written, oral and informal restriction affecting shares counted as unrestricted.
Threshold-triggered closing-price review. Repeated small purchases near the close in a security marginally above a listing threshold should prompt inquiry as a matter of routine rather than chance.
Post-listing surveillance in the first months of trading. Nominee selling, sudden volume spikes and coordinated liquidation are detectable early, and detection before investors are harmed is worth more than any application-stage metric.

A note on the exchange’s own accountability

Expanded gatekeeping carries a corresponding obligation. IM-5101-3 authorizes Nasdaq to deny a listing based on a qualitative judgment about an applicant’s advisors and its resemblance to other companies — a judgment that can end a financing and that the company must then announce publicly. Requiring a written determination, an appeal to a hearings panel and disclosure of the exchange’s stated concerns is the right structure. Whether it proves sufficient will depend on how consistently the discretion is exercised and how much of the exchange’s reasoning survives review. The New York Global Group litigation is a reminder that what an exchange concludes, and what it tells regulators, can carry consequences of its own.

Numerical standards are necessary. They are not a substitute for determining who owns the shares, who paid for them, whether the shares can actually be sold, and whether the market price arose from genuine independent trading. Investor protection should focus on keeping problematic issuers and their facilitators off the exchange — not merely on making every legitimate small issuer raise more money.

Consequences of Getting It Wrong

An issuer should not assume that the risk ends when Nasdaq approves the application. If the listing was obtained through inaccurate information, artificial trading or concealed restrictions, the consequences may include denial or delay of listing, a trading halt or suspension, delisting proceedings, referral to Nasdaq MarketWatch, FINRA, the SEC or DOJ, SEC antifraud and manipulation charges, criminal prosecution, officer-and-director bars, penny-stock bars, disgorgement, civil penalties, restitution, private litigation and reputational harm.

Denial now carries its own disclosure consequence. A company denied listing under IM-5101-3 must publicly announce the determination and the concerns Nasdaq identified within four business days.⁴⁸ A company that reaches that point no longer fails quietly, and the announcement will follow it into every subsequent financing conversation.

Listing approval does not cleanse earlier misconduct. To the contrary, evidence that the conduct was designed to obtain Nasdaq’s approval tends to establish motive, materiality and the intended effect of the scheme. In each of the trading cases discussed above, the listing objective was not a mitigating context — it was the explanation the Commission offered for why the manipulation occurred.

Practical Guidance for OTC Issuers

Do not promise Nasdaq — to investors, to the board or to the market — before the company naturally and lawfully satisfies the standards.
Do not ask holders to suppress legitimate selling unless a valid, disclosed lockup applies.
Do not count restricted, affiliated, nominee or accommodation shares as unrestricted public float.
Do not coordinate purchases, bids, closing trades or volume with shareholders, consultants or brokers.
Do not allow consultants or promoters to control the shareholder-distribution process without independent review.
Do not submit shareholder, offering or trading information that management has not verified.
Do not ignore unexplained trading merely because the activity benefits the application.
Do diligence on your own advisors — their regulatory history is now a listing factor, not merely a reputational one.
Do involve experienced independent securities counsel before the company begins the uplisting process, not after Nasdaq raises concerns.

Frequently Asked Questions About Nasdaq Uplisting and Market Manipulation

Can an issuer ask shareholders not to sell during a Nasdaq uplisting?

Only when a valid, properly documented and disclosed restriction applies. An informal request, side agreement, stop-transfer instruction or delayed legend removal used to keep shares off the market may make the represented public float misleading and may contribute to a manipulation or antifraud theory.

Can a company buy or arrange purchases to support its Nasdaq listing price?

Issuer, insider or affiliated purchases require careful analysis under the antifraud provisions and, when an offering or distribution is underway, Regulation M. Coordinated buying, bid support, matched orders or closing trades designed to reach a listing threshold can create substantial civil and criminal exposure.

Do resale-registered shares count toward Nasdaq public float?

Not automatically. Nasdaq’s 2025 liquidity amendments exclude resale-registered shares from the applicable unrestricted-public-share calculation in specified offering-related listings. The answer depends on the listing pathway, the nature of the offering and the current text of Rule 5505.

What records may Nasdaq review to verify shareholders and public float?

Nasdaq may examine transfer-agent lists, Cede & Co. information, broker searches, beneficial-holder data, share-range analyses, offering records, proof of payment, allocation information and relationships among holders, insiders and transaction participants.

Can Nasdaq deny a listing even when every numerical requirement is met?

Yes. Under IM-5101-3, Nasdaq may deny an initial listing when factors indicate that the securities are susceptible to manipulation, including concerns involving advisors, allocations, concentration, regulatory history, jurisdiction, management experience or the integrity of significant shareholders and gatekeepers.

Conclusion

An uplisting should be the result of a company’s genuine growth, adequate capitalization, authentic shareholder distribution and bona fide market activity. It should not be engineered through secret selling restrictions, nominee holders, matched trades, closing-price support or incomplete Nasdaq disclosures.

For small issuers, the most important distinction is between lawfully preparing the company to satisfy Nasdaq’s standards and manufacturing the facts Nasdaq uses to determine compliance. The first is legitimate corporate finance. The second can become securities fraud or market manipulation — and, in the most serious cases, a federal crime.

Nasdaq should continue protecting investors, and its December 2025 move toward advisor- and distribution-focused review is a meaningful step in the right direction. But higher thresholds alone will not eliminate fraud. Diligence directed at beneficial ownership, payment for shares, transfer restrictions, trading concentration and gatekeeper conduct will protect investors more effectively than any dollar figure, while preserving access to the capital markets for the legitimate small companies those markets exist to serve.

To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (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

¹Exchange Act § 12(k), 15 U.S.C. § 78l(k). Nasdaq’s rule filing collected a series of 2025 suspension orders as the basis for the proposal. See, e.g., Exchange Act Release Nos. 104112 and 104113 (Sept. 26, 2025).

²Nasdaq Listing Rule IM-5101-3 (Application of Discretion to Deny Initial Listing), adopted by SR-NASDAQ-2025-104, Exchange Act Release No. 104464 (Dec. 19, 2025), published at 90 Fed. Reg. (Dec. 29, 2025) (notice of filing and immediate effectiveness).

³Nasdaq Listing Rule 5505(a). A company applying to list its primary equity security on the Nasdaq Capital Market must satisfy all of the requirements of Rule 5505(a) and at least one financial standard in Rule 5505(b).

⁴The requirement is that at least 50% of the company’s minimum required round lot holders — not 50% of its actual holders — each hold unrestricted securities with a market value of at least $2,500. The condition, together with the exclusion of restricted holdings from the shareholder count and public float calculation and the OTC average-daily-volume test, was added by Nasdaq’s July 2019 liquidity amendments.

⁵Nasdaq Listing Rule 5505(a). The alternative applies where the security is listed in connection with a firm-commitment underwritten public offering of at least $5 million and the applicable market-value requirement is satisfied from the offering proceeds.

⁶See supra note 3.

⁷Nasdaq Listing Rule 5505(a). Alternative price pathways are available in defined circumstances; the applicable threshold depends on the financial standard used and the issuer’s profile.

⁸Nasdaq Listing Rule 5005 (definitions). “Publicly Held Shares” excludes shares held directly or indirectly by an officer, director or beneficial owner of more than 10% of the total shares outstanding; “Unrestricted Publicly Held Shares” further excludes shares subject to resale restrictions of any kind. A “Round Lot Holder” must hold a normal unit of trading of unrestricted securities.

⁹Exchange Act § 9(a)(1) and (2), 15 U.S.C. § 78i(a)(1), (2). Section 9(a)(1) reaches wash sales and matched orders entered to create a false or misleading appearance of active trading; § 9(a)(2) reaches transactions creating actual or apparent active trading for the purpose of inducing others to purchase or sell.

¹⁰Section 9(a)(2) requires proof that the transactions were effected for the purpose of inducing the purchase or sale of the security by others — a more demanding showing than the scienter required under Rule 10b-5. Section 9(f), 15 U.S.C. § 78i(f), supplies an express private right of action with its own willfulness, reliance and damages requirements and a short limitation period. The combination is why § 10(b) carries most of the weight even where § 9(a) is available.

¹¹Exchange Act § 10(b), 15 U.S.C. § 78j(b); Rule 10b-5, 17 C.F.R. § 240.10b-5. Subsections (a) and (c) reach schemes, artifices and courses of business operating as a fraud; subsection (b) addresses untrue statements and misleading omissions.

¹²Securities Act § 17(a)(1) and (3), 15 U.S.C. § 77q(a)(1), (3).

¹³Securities Act § 5, 15 U.S.C. § 77e. Liability is strict; no showing of scienter is required, and the burden of establishing an exemption rests on the person claiming it.

¹⁴18 U.S.C. § 1348 (securities and commodities fraud); 18 U.S.C. § 371 (conspiracy); 18 U.S.C. §§ 1341, 1343 (mail and wire fraud).

¹⁵18 U.S.C. § 1001 reaches false statements in any matter within the jurisdiction of the executive, legislative or judicial branch of the United States Government. A national securities exchange is a self-regulatory organization registered under Exchange Act § 6, 15 U.S.C. § 78f — not a department or agency of the United States — and statements made to it therefore fall outside § 1001 by its terms.

¹⁶The “in connection with the purchase or sale of any security” element of Exchange Act § 10(b) and the “in the offer or sale of any securities” element of Securities Act § 17(a). The Commission’s Longfin complaint framed the misrepresentations to Nasdaq as steps in a scheme to obtain the listing through which the securities reached public investors.

¹⁷FINRA Rule 5210 (Publication of Transactions and Quotations), which prohibits a member from publishing or circulating, or causing to be published or circulated, any report of a securities transaction or any quotation that the member knows or has reason to believe is not bona fide.

¹⁸FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade).

¹⁹Nasdaq Listing Rule 5101 and IM-5101-1 (Use of Discretionary Authority). Rule 5101 has long permitted denial where the company itself has engaged in misconduct or where a person with a regulatory history is associated with it; IM-5101-3 extends the authority to the risk of misconduct by unaffiliated third parties.

²⁰The complaint alleged violations of Securities Act §§ 5 and 17(a) and Exchange Act §§ 9(a), 10(b) and — as to Cedrone, who had previously been barred — 15(b)(6)(B)(i).

²¹SEC v. Michael J. Ling, No. 15-cv-02179 (D.N.J.); Litigation Release No. 23224 (Mar. 27, 2015).

²²Litigation Release No. 23439 (Dec. 23, 2015) (final judgment of $554,005.98, comprising $454,005.98 in disgorgement and prejudgment interest and a $100,000 civil penalty, and a permanent injunction under Securities Act § 17(a) and Exchange Act § 10(b) and Rule 10b-5).

²³The prerequisite alleged was a closing bid price of $4.00 or higher for 90 consecutive trading days before application, reflecting Nasdaq’s requirements as they stood in 2009–10. The current price requirement in Rule 5505(a) is framed differently.

²⁴SEC v. Richard P. Cedrone, Steven R. Ferris and George R. Thoreson, No. 17-cv-80999 (S.D. Fla. filed Aug. 31, 2017); Litigation Release No. 23928 (Sept. 5, 2017).

²⁵Exchange Act § 15(b)(6)(B)(i), 15 U.S.C. § 78o(b)(6)(B)(i), which prohibits a person subject to a Commission bar from willfully becoming associated with a broker or dealer without consent.

²⁶Each defendant consented to a permanent injunction and to an order prohibiting him from placing orders to buy or sell securities during the last 60 minutes of any trading day. Cedrone paid $5,013 in disgorgement plus prejudgment interest and a $150,000 penalty, elevated in light of his violation of a prior Commission order; Thoreson paid a $75,000 penalty and accepted industry and penny-stock bars; determination of Ferris’s penalty was deferred pending completion of his cooperation.

²⁷Regulation A, 17 C.F.R. §§ 230.251–230.263, as expanded by Title IV of the JOBS Act.

²⁸SEC v. Longfin Corp. and Venkata S. Meenavalli, No. 19-cv-5296 (DLC) (S.D.N.Y. filed June 5, 2019); SEC Press Release 2019-90 (June 5, 2019).

²⁹United States v. Wey, No. 15-cr-611 (S.D.N.Y.); see DOJ, U.S. Attorney’s Office, S.D.N.Y., press release (Sept. 2015), which now carries a notice that the charges were dismissed on August 8, 2017.

³⁰The government’s theory rested on the premise that Nasdaq does not generally count gifted shares toward the round-lot shareholder minimum, because a gift does not establish the trading interest the requirement exists to demonstrate. That premise was never adjudicated.

³¹United States v. Wey, 256 F. Supp. 3d 355 (S.D.N.Y. 2017) (suppressing evidence obtained under search warrants found to lack particularity).

³²SEC v. Benjamin Wey, et al., Litigation Release No. 24105 (Sept. 2017). The Commission stated that it had relied on evidence later suppressed in the parallel criminal proceeding and that its ability to rely on that evidence might likewise be affected.

S³³EC Press Release 2015-100 (May 26, 2015) (charging Gottbetter together with promoters Mitchell G. Adam and K. David Stevenson in the last of three schemes conducted over a six-year period).

³⁴DOJ, U.S. Attorney’s Office, D.N.J., press release (May 26, 2015). Practitioners citing the monetary figures should confirm them against the release, as reported amounts have varied across secondary sources.

³⁵DOJ, U.S. Attorney’s Office, E.D.N.Y., press releases (May 4, 2016) (indictment of nine individuals, including five registered brokers) and (May 23, 2017) (sentencing of a registered broker). The loss figure is the government’s.

³⁶SEC Press Release 2013-39 (Mar. 15, 2013).

³⁷Rule 144, 17 C.F.R. § 230.144. Legend removal ordinarily proceeds on the holder’s request supported by documentation establishing that the conditions of the rule have been satisfied, together with a supporting opinion. Once those conditions are met and the documentation is furnished, continued refusal is an affirmative act by the issuer or transfer agent, not the mere absence of one.

³⁸Rule 104, 17 C.F.R. § 242.104, which permits stabilization only at prescribed prices, by a person identified as the stabilizing agent, and subject to disclosure, notification and recordkeeping conditions.

³⁹Regulation M, 17 C.F.R. §§ 242.100–242.105. Rule 101, 17 C.F.R. § 242.101, applies to distribution participants and their affiliated purchasers; Rule 102, 17 C.F.R. § 242.102, applies to issuers and selling security holders and their affiliated purchasers.

⁴⁰See the definition of “restricted period” in Rule 100(b), 17 C.F.R. § 242.100(b). For a security with an average daily trading volume of at least $100,000 whose issuer has a public float value of at least $25 million, the period generally begins one business day before the determination of the offering price. For all other securities it generally begins five business days before pricing.

⁴¹Nasdaq has separately tightened its treatment of issuers effecting repeated reverse stock splits, including through accelerated suspension and delisting procedures for companies with a history of splits and continued listing deficiencies.

⁴²The test is practical rather than legal. Item 8.01 of Form 8-K permits voluntary disclosure of any event the registrant deems of importance to security holders; a step that could not be described there is unlikely to withstand a staff inquiry that asks the same questions under oath.

⁴³See supra note 4.

⁴⁴The enumerated factors are non-exclusive and none is dispositive standing alone. They include considerations relating to the company’s advisors — expressly including auditors, underwriters, law firms, brokers, clearing firms and other professional service providers — whether the expected public float and dissemination of the share distribution (assessed through underwriter, broker and clearing allocations and prior deals involving those providers) raises concerns about liquidity and concentration, the effect of foreign law on regulatory recourse and diligence, and management and board familiarity with U.S. markets.

⁴⁵Under IM-5101-3, a denial requires a written determination, is appealable to a Nasdaq hearings panel, and must be publicly announced by the company in a Regulation FD-compliant manner within four business days of the determination.

⁴⁶See supra note 1.

⁴⁷Compare NYSE Listed Company Manual § 104.00 and NYSE American Company Guide § 201, which require companies to complete a pre-review process before they are permitted to apply for listing.

⁴⁸See supra note 56.

Selected Authorities and Further Reading

Nasdaq listing rules and recent rulemaking

Nasdaq Listing Rule 5505 — Nasdaq Capital Market Initial Listing Requirements

Nasdaq Listing Rule 5101 and interpretive material — Nasdaq’s Discretionary Authority

SR-NASDAQ-2025-068 — Increase in Minimum MVUPHS Under the Net Income Standard

SR-NASDAQ-2025-104 — Adoption of IM-5101-3, Limited Discretion to Deny Initial Listing

SR-NASDAQ-2024-084 — Order Granting Accelerated Approval, Initial Listing Liquidity Requirements (Mar. 12, 2025)

Uplisting to Nasdaq: When “Helping” the Stock Price Becomes Market Manipulation