In April, the Securities and Exchange Commission (the “SEC”) announced that it is soliciting comments on a proposed rule change submitted by The Nasdaq Stock Market LLC (the “Nasdaq”) that will impose additional requirements for companies listing in connection with offerings under Tier 2 of Regulation A under the Securities Act of 1933 (the “Securities Act”). The rule would require any company listing on the Nasdaq in connection with a Regulation A offering to have a minimum operating history of two years at the time of the approval of its listing application.
The SEC has previously expressed concern that companies seeking to list in conjunction with Regulation A offerings have less developed business plans and may not be as prepared to operate as public companies when compared with other companies seeking to list on the Nasdaq. Additionally, the SEC has raised concerns that investors may be exposed to greater risk of fraud from less mature companies. In response to these concerns, the Nasdaq has proposed the rule change, stating that it believes the two-year minimum operating history requirement will help ensure that companies seeking to list under Regulation A have an established business plan and history of operations that investors can more predictably rely on.
The text of the proposed rule change is available on the SEC’s website. Those interested in submitting comments should do so within 45 days of the SEC’s announcement.