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December 18, 2009
Nasdaq-Listed Companies: Before Releasing Material Information to the Public, Notify Nasdaq
Neil Ganulin, Alan K. MacDonald, Luke J. Frutkin

Nasdaq Aligns with NYSE Notification Requirement; What had been recommended is now required

A recent Nasdaq rule change more closely aligns Nasdaq's notification requirements with those of the NYSE, which require listed companies to alert the NYSE by telephone at least ten minutes before announcing material information and, if the announcement will be in written form, to email the text of the announcement to the NYSE at least ten minutes before releasing the announcement.1

Effective December 7, 2009, Nasdaq-listed companies must notify Nasdaq at least ten minutes before releasing certain material information to the public, and the notification must be submitted using Nasdaq's electronic disclosure submission system available at http://nasdaq.net/publicpages/NasdaqHomePage.aspx.2 Prior to December 7, Nasdaq had only recommended that companies submit advance notice.

Events Triggering Pre-Notification

Nasdaq-listed companies are now required to notify the MarketWatch Department at least ten minutes before making public disclosure of material information that involves any of the following events:
  • Financial-related disclosures, including quarterly or yearly earnings, earnings restatements, preannouncements or "guidance."

  • Corporate reorganizations and acquisitions, including mergers, tender offers, asset transactions and bankruptcies or receiverships.

  • New products or discoveries, or developments regarding customers or suppliers (e.g., significant developments in clinical or customer trials, and receipt or cancellation of a material contract or order).

  • Senior management changes of a material nature or a change in control.

  • Resignation or termination of independent auditors, or withdrawal of a previously issued audit report.

  • Events regarding the Company's securities — e.g., defaults on senior securities, calls of securities for redemption, repurchase plans, stock splits or changes in dividends, changes to the rights of security holders, or public or private sales of additional securities.

  • Significant legal or regulatory developments.

  • Any event requiring the filing of a Form 8-K.

Based on Nasdaq's assessment of the materiality of the information and its anticipated impact on the price of the company's securities, Nasdaq may advise that a temporary trading halt is appropriate to allow for full dissemination of the information. Of course, not every event that triggers pre-notification to Nasdaq would be deemed to warrant a trading halt.

Failure to Comply & Next-Steps

Nasdaq may issue a Public Reprimand Letter or, in extreme cases, a Staff Delisting Determination if a company repeatedly fails to timely submit the pre-notification or to submit it using Nasdaq's electronic disclosure submission system. 

Each Nasdaq-listed company should review its disclosure practices and procedures and establish adequate controls to ensure timely compliance with the mandatory pre-notification requirements. 

Use of Company Websites to Satisfy Public Disclosure Requirements

In addition to the changes regarding mandatory pre-notification, changes were made to align Nasdaq IM-5250-1 with SEC guidance regarding use of company websites to satisfy public disclosure requirements.3 Before the change, IM-5250-1 provided that a website posting would not by itself satisfy the public disclosure requirements of Regulation FD. Nasdaq has modified this language to provide that a website posting may (or may not) by itself be considered a sufficient method of public disclosure under Regulation FD and SEC guidance thereunder, and as a result, under Nasdaq rules. Regardless of the method of disclosure that a company chooses to use to satisfy its public disclosure obligations, companies are required to comply with the pre-notification requirement. 

If you have questions about these requirements or would like additional information, please contact Neil Ganulin, Alan MacDonald, Luke Frutkin, or any member of our Public Companies and Securities practice group.

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1See NYSE Listed Company Manual Section 202.06(B).

2The rules affected are Nasdaq Rule 5250(b)(1) and IM-5250-1. Notifications submitted by phone or fax will no longer be sufficient, except in emergency situations.
3For the SEC's guidance, see Securities Exchange Act Release No. 58288 (August 1, 2008), available here.