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  Listing Council Decision 2011-2
Identification Number 603
Rule 5250(c)(1):  A company shall timely file all required periodic financial reports with the Commission through the EDGAR System or with the Other Regulatory Authority.  A company that does not file through the EDGAR System shall supply to NASDAQ two (2) copies of all reports required to be filed with the Other Regulatory Authority or email an electronic version of the report to NASDAQ at continuedlisting@nasdaqomx.com.  All required reports must be filed with NASDAQ on or before the date they are required to be filed with the Commission or Other Regulatory Authority.  Annual reports filed with NASDAQ shall contain audited financial statements.
 
Rule 5101:  NASDAQ is entrusted with the authority to preserve and strengthen the quality of and public confidence in its market. NASDAQ stands for integrity and ethical business practices in order to enhance investor confidence, thereby contributing to the financial health of the economy and supporting the capital formation process.  NASDAQ Companies, from new public Companies to Companies of international stature, are publicly recognized as sharing these important objectives.  NASDAQ, therefore, in addition to applying the enumerated criteria set forth in the Listing Rule 5000 Series, has broad discretionary authority over the initial and continued listing of securities in NASDAQ in order to maintain the quality of and public confidence in its market, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to protect investors and the public interest. NASDAQ may use such discretion to deny initial listing, apply additional or more stringent criteria for the initial or continued listing of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes initial or continued listing of the securities on NASDAQ inadvisable or unwarranted in the opinion of NASDAQ, even though the securities meet all enumerated criteria for initial or continued listing on NASDAQ. In all circumstances where the Listing Qualifications Department (as defined in Listing Rule 5805) exercises its authority under Listing Rule 5101, the Listing Qualifications Department shall issue a Staff Delisting Determination under Listing Rule 5810 (c)(1), and in all circumstances where an Adjudicatory Body (as defined in Listing Rule 5805) exercises such authority, the use of the authority shall be described in the written decision of the Adjudicatory Body.
 
Issue:  The company was delisted by a Hearings Panel for public interest concerns based on: the resignations of the company’s auditors, Chief Financial Officer, and an independent Board member and the reasons stated for those resignations; the serious questions raised by the reports of forensic accountants that go to core issues regarding the integrity of the company’s finances and operations; the lack of audited financials on file for 2010, uncertainty as to the reliability of prior years financials, and the multiple obstacles to prompt compliance with filing obligations; and, finally, the pattern of the company’s responses to requests from accountants and NASDAQ as this matter has unfolded.
 
Determination:  Affirmed.  After a review of the record in this matter, the Listing Council affirms the Panel Decision.  As noted by the Panel, NASDAQ Listing Rule 5101 grants NASDAQ broad discretion to delist the securities of a company in order to maintain the quality of and public confidence in the market, prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade and protect investors and the public interest.  The bases noted by the Panel in its decision to delist the company fit squarely within the ambit of the rule.  The serious allegations made against the company and its current management, supported by concerns noted by both its independent public auditor and independent investigator, together with the resignations of independent directors all support a determination to delist the company from NASDAQ.  Furthermore, the Listing Council shares Staff’s concern regarding the feasibility of the company’s proposed timeline for compliance.  The Listing Council notes that investigations concerning such serious allegations do not lend themselves to quick conclusion nor are the issues often identified easily resolved.  Moreover, the Listing Council notes that the company has missed prior milestones it set for itself and has shown little demonstrable progress toward quick resolution of its deficiencies.  Concerning to the Listing Council is that much of the delay in investigating and resolving the issues in this matter has been caused by the company, and not due to issues beyond the company’s control.  As a self-regulatory organization, NASDAQ is charged with the protection of investors and the public interest.  The Listing Council believes that allowing the company to remain listed on NASDAQ, whether halted or not, would be misleading to the investing public and signal a level of comfort with the company that is simply not present.
 
Accordingly, the Listing Council affirms the Panel decision to delist the company’s securities based on the exercise of the broad discretionary authority of Listing Rule 5101.
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 603
material_search_footer*The Publication Date reflects the date of first inclusion in the Reference Library, which was launched on July 31, 2012, or a subsequent update to the material. Material may have been previously available on a different Nasdaq web site.
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