Nasdaq's $5 Million MVLS Rule Approved: What Issuers Need to Know About the Final Rule and the SEC’s Temporary Stay of Effectiveness

In our previous client alert, Nasdaq’s Modified $5 Million MVLS Proposal Offers Limited Relief, But Raises the Bar for Small-Cap Issuers Seeking to Remain Listed, we discussed Nasdaq’s proposal to adopt a continued listing standard requiring all companies listed on the Nasdaq Global Select Market, Global Market and Capital Market to maintain at least $5 million in Market Value of Listed Securities (“MVLS”). We also examined the proposal’s potential impact on small-cap issuers, particularly its elimination of a traditional compliance period.

On Jul. 22nd, the Securities and Exchange Commission (the “SEC” or the “Commission”) approved the rule, as modified by Amendment No. 1. While the final rule largely adopts the framework proposed by Nasdaq, it includes one important change that provides companies with greater procedural flexibility than originally contemplated.

Following the approval order, however, the SEC’s Deputy Secretary issued a notice staying the effectiveness of the rule pending expiration of the period during which the Commission may grant review of the action under the SEC’s Rules of Practice. The SEC issued this notice of stay because it received at least two notices of intention to petition the order for review.  Until the Commission orders otherwise, the stay will remain in effect.

What Stayed the Same

The approved rule requires companies listed on the Nasdaq Global Select Market, Global Market and Capital Market to maintain an MVLS of at least $5 million. A company whose MVLS remains below that threshold for 30 consecutive business days will receive a Staff Delisting Determination and become immediately subject to suspension and delisting proceedings.

As we noted in our prior alert, the rule does not provide an automatic compliance or cure period comparable to those available for many other Nasdaq listing deficiencies. Companies therefore cannot rely on the traditional remediation timeline of 180 days after receiving a deficiency notice.

What Changed

The most significant revision of the rule concerns the role of the Nasdaq Hearings Panel.

Under the rule as originally proposed, the Hearings Panel’s authority would have been limited largely to determining whether Nasdaq correctly calculated a company’s MVLS. Following comments submitted during the rulemaking process, Nasdaq broadened the Panel’s authority to grant an exception to a delisting determination by providing up to 180 days to the company to demonstrate the ability to satisfy the higher threshold of Nasdaq’s initial listing standards, rather than simply regaining an MVLS above $5 million.

Although this amendment restores a measure of procedural flexibility, it should not be viewed as a substitute for a traditional cure period. Meeting Nasdaq’s higher initial listing standards generally requires substantially stronger financial and market metrics than continued listing standards, making this relief available only in limited circumstances.

Practical Implications

The SEC’s approval confirms a broader regulatory shift toward earlier intervention for issuers experiencing sustained declines in market value.

For companies approaching the $5 million threshold, they will need to become more active with their compliance efforts. Rather than relying on a post-notice remediation period, boards and management teams should regularly monitor MVLS alongside other key listing metrics and consider potential financing, strategic or corporate governance measures before the 30-business-day clock begins to run.

Perhaps more importantly, issuers should understand that the newly expanded hearing process is not a second compliance period. Instead, it is a narrowly tailored opportunity to demonstrate that the company satisfies Nasdaq’s more rigorous initial listing standards—a materially higher bar than simply restoring compliance with continued listing requirements.

While the temporary stay delays the rule’s effectiveness, it does not alter the SEC’s approval of the new continued listing standard. Accordingly, issuers operating near the proposed threshold should not view the stay as an indication that the rule is unlikely to become effective.

Looking Ahead

NYSE American, by contrast, has taken a different path. As discussed in our prior alert, NYSE American originally proposed a similar $5 million global market capitalization continued listing requirement. In Amendment No. 3, however, NYSE American removed that provision from the proposal, leaving the SEC to consider an amended rule focused principally on the proposed $0.25 minimum trading price standard. As a result, Nasdaq’s rule is currently the only approved exchange rule imposing a $5 million market value continued listing requirement.

The immediate focus now turns to whether the Commission will grant review during the stay period. If the Commission declines review, the stay will expire and Nasdaq’s new continued listing standard will become effective in accordance with the SEC’s approval order.

Contact Clark Hill

If this development is of interest to your business or if you have questions regarding the content of this alert, please contact any member of Clark Hill’s Capital Markets and Securities group for additional details and strategic guidance.

Jeny Zarmon (jzarmon@clarkhill.com; 609.785.2918)

Victoria Bantz (vbantz@clarkhill.com; 303.943.9279)

Jim Groth (jgroth@clarkhill.com; 312.701.6830)

Randy Katz (rkatz@clarkhill.com; 213.417.5310)

Sander Zagzebski (szagzebski@clarkhill.com; 213.417.5175)

Charles Berry (cberry@clarkhill.com; 480.684.1302)

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