At the end of last year, Nasdaq filed with the SEC a rule proposal that would require companies to disclose denial of listing applications. Under the proposal, a company that receives a written determination denying its application for listing must, within four business days, make a public, FD-compliant announcement about the receipt of the determination and the specific bases for the determination and the concerns expressed by Nasdaq. If the announcement satisfying the requirements is not made on a timely basis, Nasdaq will make the public announcement.  If the company then appeals the decision, the Nasdaq Hearings Panel will take into account the failure to publicly announce in considering whether to list the company.

The context of the proposal is that, in cases where a company does not meet the listing requirements or where Nasdaq determines to deny an application based on public interest concerns, Nasdaq advises the company of the decision and, as set forth in the proposal (memorializing current practice), the company can then withdraw its application before the application is formally denied.  If not withdrawn, Nasdaq issues a formal written denial, which can be appealed.  Although companies are required to disclose delisting determinations, they are not currently required to disclose initial listing denials. Nasdaq indicates in the filing that it believes that denial of initial listing is just as material, particularly when the company has previously announced its intention to seek listing. Although Nasdaq would not require disclosure when a company withdraws its listing application before receiving a written denial determination (not to mention that, in that circumstance, Nasdaq would have no enforcement authority), Nasdaq “believes that such disclosure may be appropriate and encourages companies to make such disclosure.”

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