Newer standards: Nasdaq gains the right to more stringent rejection of problematic IPOs

shadowy_supercoder · 2026-01-12T12:46:23+00:00

The SEC has strengthened regulations by allowing Nasdaq to reject listings from companies with high manipulation risks. New criteria include issues with engagement with US regulators and questionable management integrity. This aims to restore investor trust and improve IPO quality.

shadowy_supercoder

2026-01-12 12:46:23

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The US regulatory system is tightening. On Friday, the Securities and Exchange Commission (SEC) approved expanded criteria for Nasdaq, allowing the exchange to reject listings of companies with high manipulation risks in the market.

What exactly has changed? Previously, Nasdaq had limited tools to filter out questionable companies. Now, the exchange has discretionary rights to reject listing applications if the following red flags are identified:

The company’s main operational base avoids or refuses to interact with American regulators
Involved in the IPO are borrowed figures — underwriters, brokers, legal advisors, or auditors with a history of problematic deals
There are grounds to doubt the honesty of top management or major investors

Why did the SEC rush this step? Recent years have shown a troubling trend. The exchange records a significant decline in small IPOs after their debut: half of Nasdaq’s traded companies raised less than $15 million in capital, and shareholders lost over a third of their value within the following year. Such crashes undermine investor confidence in the market and create a basis for price manipulation.

The new rejection mechanism is a response from the SEC to the need to improve IPO quality and restore market participants’ loyalty to listed companies.

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