The move underscores a push to tighten gatekeeping as firms from opaque jurisdictions look to tap public markets in the U.S., where a deeper pool of capital often gives companies better valuations than they can get elsewhere.
It follows a period of heightened scrutiny of market volatility and would give the exchange more room to act when it sees warning signs. If adopted, the rule could raise the bar for transparency for foreign companies. Under the new changes, Nasdaq would have limited discretion to block an IPO after reviewing factors such as the company’s headquarters, the availability of legal remedies to U.S. shareholders in that jurisdiction and the influence of controlling parties.
“Nasdaq requires additional authority to exercise discretion to deny a listing based on the potential for one or more third parties to engage in misconduct impacting a company’s securities,” the exchange operator said in the filing on Friday.
The exchange would also vet companies more closely if it believes their boards lack adequate experience, or if the advisers have questionable histories.
“Nasdaq rules do not presently allow it to deny listing to a company based on its review of trading patterns of other companies with similar characteristics or based on considerations related to the company’s advisors, and it requires additional authority to exercise discretion to do so,” Nasdaq said.
PUMP-AND-DUMPA so-called pump-and-dump scheme involves artificially driving up the price of a stock and then selling it at the peak, leaving other investors with steep losses. Nasdaq has conducted a years-long investigation to curb sharp stock rallies among smaller China-based companies, after a rise in recent years in shares of firms that raised only modest sums in their IPOs.
Investors have been heavily bruised by some of these listings, with certain Chinese stocks surging as much as 2,000% on their debut before plunging in the days that followed.
In September, Nasdaq introduced stricter listing standards, including a higher minimum public float for some new listings and a faster process to delist thinly traded companies, as part of a broader effort to crack down on potential market manipulation.
