New Listing Standards for Reverse Merger Issuers
On July 9, 2011, the Securities and Exchange Commission (“SEC”) approved rules to increase the standards for companies going public through a reverse merger to list on the New York Stock Exchange (“NYSE”), American Stock Exchange (“AMEX”) and the NASDAQ Stock Market (“NASDAQ”).
Companies who become public through reverse mergers can become listed on any stock exchange like companies who go public by registering with the Securities and Exchange Commission. In 2010, the SEC launched an initiative to determine if issuers with foreign operations were accurately reporting their financial results, and to assess the quality of the audits being done conducted by the auditors of these issuers with foreign operations.
As a result, the SEC suspended or halted trading in more than 35 companies with foreign operations because they lacked current and accurate information, many of which went public by reverse mergers. Under the new rules, a reverse merger issuer cannot list on the NYSE, Amex or Nasdaq until after it has traded for one year on the over-the-counter market or on another regulated exchange, filed all required reports and filings with the SEC for such time, including its audited financial statements and maintained a minimum share price for a set period of time. A reverse merger company generally would be exempt from the new rules if its listing is in connection with a substantial firm commitment underwritten public offering, or it has filed at least four annual reports with the SEC that contained audited financial information.
ABOUT THE AUTHOR: Brenda Lee Hamilton, P.A.
Ms. Hamilton counsels clients in stock exchange listings involving the New York Stock Exchange, American Stock Exchange, NASDAQ and the OTC Markets. She also assists clients with obtaining dual and single listings on international exchanges such as the Frankfurt, TSX Venture Exchange , Toronto and London exchanges including compliance with regulatory requirements of the various Securities Commissions, including corporate governance matters, liaising with the various Securities Commissions, continuous disclosure and other filing requirements with the various Securities Commissions, prospectus preparation and filings (IPO and non-IPO), preparation and filing of stock exchange listing submissions , compliance with various stock exchange policies.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.