Nasdaq Hearings and Appeals

When Nasdaq sends a delisting determination letter, the clock starts on decisions that determine whether the company keeps its listing. The letter states the rules the company no longer meets, the deadline to respond, and what happens if the company does nothing. Requesting a hearing is how the company appeals that determination, and a timely request usually keeps the securities trading while an independent Panel reviews the case.

What Triggers a Delisting Determination?

Qualifications Staff monitors continued-listing compliance across the rule set: minimum bid price, market value, stockholders' equity, distribution standards, annual meetings and proxies, shareholder approval for certain issuances, and the disclosure duties under Rule 5250. When Staff concludes that a company fails a requirement that has no cure period, or that a cure period has run its course, it issues a delisting determination letter.

A few situations are treated differently. SPACs that listed under Nasdaq's alternative SPAC standards are subject to immediate delisting when continued-listing requirements are not met, and a timely hearing request does not stay the suspension of trading in their securities. A failure to make the required disclosure about a deficiency or determination is itself a separate basis for delisting, so a letter can cite more than one problem. The Staff determination can also rest on Nasdaq's discretionary authority under Rule 5101, and in that case the letter must state the specific concerns Staff relied on.

What Must the Company Disclose, and How Quickly?

A company must publicly disclose the receipt of a notification of deficiency, a public reprimand letter, or a delisting determination, including an additional deficiency sent to a company already in the hearings process. The announcement must identify the rules Nasdaq relied on and describe each specific basis and concern Staff identified in reaching its conclusion. If the deficiency concerns the requirement to file a periodic report, the company announces it by press release in addition to any Form 8-K that SEC rules require. In all other cases, the company may announce by filing a Form 8-K or by issuing a press release. The announcement should be made promptly, and no more than four business days after the company receives the determination.

Listing Rule 5250(b)(1) and IM-5250-1 also require the company to notify Nasdaq's MarketWatch Department of the announcement through Nasdaq's Electronic Disclosure Submission System. If the announcement is made during market hours, MarketWatch must be notified at least ten minutes before it is published. If it is made outside market hours, MarketWatch must be notified before 6:50 a.m. ET.

A late or incomplete announcement carries its own consequences. Nasdaq will halt trading in the company's securities, may make the public announcement with the required information itself, and the failure to disclose becomes an additional basis for delisting.

How and When Does the Company Request a Hearing?

The delisting determination letter explains how and when to request a hearing and what the consequences are of failing to request one. The request must be submitted through the Nasdaq Listing Center within seven calendar days of the date on the letter. A company that was denied initial listing also has the right to appeal that denial by requesting a hearing.

In most cases, a timely hearing request stays the delisting pending a written decision by the Hearing Panel, so no delisting action is taken until after the hearing. There is an important exception. When the deficiencies include the failure to timely file a periodic report, the hearing request stays the suspension for only fifteen calendar days from the date the request was due. That window typically closes before a hearing can be scheduled. A company in that position may ask that the fifteen-day stay be extended until the hearing takes place and a decision issues. The extension request accompanies the hearing request and should explain why the company believes an extension is appropriate.

Oral Hearing or Written Hearing?

The company chooses between an oral hearing and a written hearing. An oral hearing is a video conference with the Hearing Panel: the company presents its case, answers the Panel's questions, and can update the Panel on developments since it submitted its plan. A written hearing presents the case in writing only.

The fee for a hearing is $20,000. Nasdaq asks that it be paid by wire transfer at the same time the hearing request is submitted, using the instructions on the payment form sent with the delisting determination letter. The fee applies to every company, including companies that participate in the All-Inclusive Annual Listing Fee program, because hearings and appeals fees are the only regulatory fees that program does not cover.

What Happens Before and at the Hearing?

After the request is filed, Nasdaq gives the company a pre-hearing schedule for submitting a plan of compliance. The plan is reviewed by the Hearing Panel and by Listing Qualifications Staff before the hearing. Staff then submits a Hearing Memorandum, which is its response to the company's plan, and the company receives a copy of that memorandum before the hearing. The company may respond to Staff's memorandum during the hearing.

What Can the Panel Decide?

The Panel's written decision can take several forms. It may determine to continue the listing subject to conditions, grant a short-term compliance period of up to ninety days where the conditions for that relief are met, designate a Compliance Panel to monitor a shorter-term compliance question, or determine to delist the securities. Whatever the outcome, the decision states what the company must do and by when.

Can the Panel's Decision Be Appealed?

Yes. The company may file a call for review with the Listing and Hearing Review Council within the period stated in the Panel's decision letter. A call for review keeps the matter pending with the Council. Whether an oral hearing is held at the Council level depends on the nature of the matter and on how the Panel decided it. The Listing Council's decision is final within Nasdaq, and the only further review is an appeal to the SEC under Section 19(c) of the Exchange Act and SEC Rule 431.

What Happens If the Company Is Delisted?

A delisting does not end the company's obligations as an SEC reporting company. In most cases the company continues to file periodic reports until it deregisters, and deregistration through a Form 15 has its own eligibility requirements and waiting period. Quotation usually moves to the over-the-counter market. A transition plan should cover shareholder communications, transfer-agent readiness, and the disclosure obligations that continue after the ticker is gone.

How Does Capital Markets Law Group Help?

Our services may include:

1. Reviewing the delisting determination letter and the deadline it sets
2. Preparing the required public disclosure and the MarketWatch notification
3. Filing the hearing request, and any stay extension request, within the deadlines
4. Advising on the oral-hearing and written-hearing choice
5. Preparing the plan of compliance for the Panel
6. Preparing for the hearing and responding to Staff's Hearing Memorandum
7. Advising on a call for review to the Listing Council and on appeal to the SEC
8. Planning the transition if the listing cannot be preserved

Frequently Asked Questions

How long does the company have to request a hearing after a delisting determination?

Seven calendar days from the date of the delisting determination letter. The request is submitted through the Nasdaq Listing Center. A timely request generally stays the delisting pending the Panel's decision, except that when the deficiencies include a late periodic report, the automatic stay lasts only fifteen calendar days from the date the request was due. The company can ask that the stay be extended until the hearing takes place and a decision issues.

How much does a Nasdaq hearing cost?

The hearing fee is $20,000. Nasdaq asks that it be paid by wire transfer when the hearing request is submitted, following the payment form that comes with the delisting determination letter. It applies to every company, including companies in the All-Inclusive Annual Listing Fee program.

What must the company disclose when it receives a delisting determination?

The receipt of the determination, the rules it is based on, and each specific basis and concern Nasdaq identified, announced promptly and within four business days of receipt. A periodic-report deficiency is announced by press release in addition to any required Form 8-K, and Nasdaq's MarketWatch Department must be notified of the announcement.

What happens if the company does not disclose the determination?

Nasdaq will halt trading in the company's securities, may publish the required information itself, and the failure to disclose becomes an additional basis for delisting.

What is the difference between an oral hearing and a written hearing?

An oral hearing is a video conference with the Panel, where the company presents its case, answers questions, and can update the Panel on new developments. A written hearing presents the case in writing only.

Can a Nasdaq Panel decision be appealed?

Yes. The company may file a call for review with the Listing and Hearing Review Council within the period stated in the Panel's decision letter. The Listing Council's decision is final for Nasdaq, and review beyond that lies with the SEC under Section 19(c) of the Exchange Act and SEC Rule 431.