Nasdaq submits new plan to step up action on suspected manipulation

NEW YORK: Nasdaq filed a new rule on Friday that would allow the exchange to block IPOs even when companies meet all listing standards if it detects red flags that could make a company’s stock vulnerable to manipulation.

The move underscores a push to tighten gatekeeping as firms from opaque jurisdictions look to tap public markets in the US, 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 US 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.

A 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.