Anthony, Linder & Cacomanolis, PLLC

Nasdaq Rule 5210 sets forth the prerequisites for a company to apply for a Nasdaq listing. Until October 2023, the Rule had 12 subparts with new Rule 5210(l) being added in October 2023 and new Rule 5210(m) being added in March 2024. Rule 5210(l) requires that any company listing on Nasdaq comply with the recovery of erroneously awarded compensation (Clawback) rules. #SecuritiesLawBlog #NASDAQ #IPO #ALCLAW

Amended Nasdaq Rule 5210 created the “limited underwriting member” class and accompanying rules applicable to the group and its associates including eligibility, application process and ongoing requirements. Although the amendment garnered little attention at the time, now that it has become effective, it is loudly impacting the small cap IPO market. #SecuritiesLawBlog #NASDAQ #IPO #ALCLAW

In March 2024, the Nasdaq Stock Market quietly amended Rule 5210 requiring that all lead underwriters on an IPO must be Nasdaq members or limited underwriting members, as a prerequisite to applying for a listing. #SecuritiesLawBlog #NASDAQ #IPO #ALCLAW

Terminating Reporting Obligations In An Abandoned IPO- https://lnkd.in/eA2QP-Ay #SecuritiesLawBlog #SEC #IPO #ALCLAW

This type of arbitrary implementation was a concern to the Supreme Court when it overturned the Chevron doctrine in Loper Bright Enterprises v. Raimondo. As Justice Gorsuch explained in his concurring opinion, “because the reasonable bureaucrat may change his mind year-to-year and election-to-election, the people can never know with certainty what new ‘interpretations’ might be used against them.” #SecuritiesLawBlog #SEC #ALCLAW

Commissioner Uyeda questions whether the Supreme Court would have an issue with the SEC’s interpretation on dealer licensing requirements in light of the recent striking down of the Chevron defense. In particular, “[S]ingling out of notes transactions as requiring dealer registration appears to be an arbitrary application of the “dealer” definition. #SecuritiesLawBlog #SEC #ALCLAW

Commissioner Uyeda notes that under the SEC’s “broad definition of “dealer,” nearly any activity that involves buying and selling securities outside of the trader exception could require registration under the Exchange Act. Yet the action against GHS [and all the other defendant litigants] is solely focused on its transactions involving convertible, variable rate notes.” #SecuritiesLawBlog #SEC #ALCLAW

On August 19, 2024, the SEC announced the settlement of a “dealer” enforcement proceeding against GHS Investments and its principals prompting Commissioner Uyeda to issue a statement. Commissioner Uyeda points out that the proposed Rule 144 amendments would achieve the unspoken policy objective regarding convertible, variable rate notes. However, without the final rule, the SEC continues to regulate the issue by enforcement. #SecuritiesLawBlog #SEC #ALCLAW

The numerous and prolific convertible note investors into small-cap exchange traded companies have yet to face enforcement proceedings. Presumably that is because most of those investments are registered and the national exchanges require a floor price on the conversion price. However, there is nothing in the dealer statute, rules, guidance, interpretations or the like that distinguishes between registered or unregistered deals or conversion prices. #SecuritiesLawBlog #SEC #ALCLAW

There is no precedent for the theory that if you trade in convertible notes instead of open market securities, private placements instead of registered deals, bonds instead of stock, or warrants instead of preferred stock, etc., you either must be licensed as a dealer or are exempt. Likewise, there is nothing in the broker dealer regime that suggests that if you invest in penny stock issuers vs. middle market or exchange traded entities you need to be licensed as a dealer. #SecuritiesLawBlog #SEC #ALCLAW