During the 2025 calendar year, the U.S. Securities and Exchange Commission (the “SEC”) and The Nasdaq Stock Market (“Nasdaq”) took a number of actions, generally with the stated intention of protecting investors and promoting fair and orderly markets, that could adversely impact the ability of foreign private issuers (“FPIs”)[1] to qualify for FPI status, list their securities for trading on Nasdaq and access the U.S. capital markets. At the beginning of this year, we prepared a client update that discussed these developments.[2]

Now that we have passed the one-third point in 2026, we wanted to provide a status update on some of the items discussed in our prior client update that continue to evolve, and also provide details about some potential new challenges for FPIs that have arisen since that time.

Concept Release Regarding Foreign Private Issuers

On June 4, 2025, the SEC published a concept release soliciting comment on the definition of “foreign private issuer”, and in particular whether that definition should be amended in light of significant changes in the population of FPIs since 2003.[3]

The concept release included 69 requests for comment on potential changes to the FPI definition, including the following: (i) updating the existing FPI eligibility criteria; (ii) adding a foreign trading volume requirement; (iii) adding a major foreign exchange listing requirement; (iv) incorporating an SEC assessment of foreign regulation applicable to the FPI; (v) establishing new mutual recognition systems; and (vi) adding an international cooperation arrangement requirement.

To date, the SEC has received over 90 responses to the concept release.[4] However, the SEC has not yet proposed any amendments to the FPI definition. We will continue to monitor any developments as they arise.

Formation of Cross-Border Task Force; NASDAQ Proposal to De-List Halted Companies

On September 5, 2025, the SEC announced the formation of a task force to enhance the Division of Enforcement’s efforts to identify and combat cross-border fraud harming U.S. investors.[5] Since the formation of the task force, the SEC has issued orders suspending the trading of fourteen Asia-based FPIs with a diverse range of businesses that have conducted an initial public offering raising between $5 million to $15 million within the prior two years.[6] The orders allege potential manipulation of securities effectuated through recommendations made by unknown persons via social media, which appear to be designed to artificially inflate the price and trading volume of the securities. In each case, after the expiration of the initial ten business day SEC suspension, Nasdaq announced that it has requested additional information and that trading will remain halted.

To date, the securities of none of the impacted FPIs have resumed trading, and neither the SEC nor the issuers have provided meaningful updates about the status of the proceedings, though some have stated in their SEC reports that they have received additional inquiries from the SEC and/or Nasdaq. At least two of the FPIs – Charming Medical Ltd. and Smart Digital Group Ltd. – were sued for securities fraud in connection with the trading suspensions, and it is possible that plaintiffs’ law firms have already filed, or will file, similar complaints against some or all of the others. Currently, there is no timetable as to when, or if, the suspensions may be lifted.

Perhaps more ominous for these FPIs is that, on February 20, 2026, Nasdaq filed a proposed rule change with the SEC that would provide Nasdaq with the discretionary authority to “delist a company from Nasdaq based on the potential for one or more third parties to engage in misconduct impacting a company’s securities where the SEC has implemented a temporary trading suspension.”[7] Nasdaq noted that it is proposing this rule change as a result of its observation of “problematic or unusual trading in certain listed companies, apparently effectuated through recommendations made to investors by unknown persons via social media to purchase, hold, and/or sell the securities”, which recommendations “appear to be designed to artificially inflate the price and volume of the securities.”

In exercising its authority to delist a specific company, Nasdaq would consider whether the listed securities may be susceptible to manipulation based on a set of factors that Nasdaq and other regulators have identified with companies that previously were the subject of problematic or unusual trading. The SEC is currently soliciting comments on the proposed rule change and is expected to either approve or disapprove it within the coming months.

Higher Listing Standards Targeting China-Based Companies

In response to the sharp increase in the number of China-Based Companies[8] seeking to list on U.S. national securities exchanges, and the prevalence of concerns that Nasdaq has identified regarding the trading of China-Based Companies,[9] on September 3, 2025, Nasdaq proposed a rule change[10] to enhance its initial listing standards by adopting stricter criteria for China-Based Companies.

As per the proposed rules, a China-Based Company:

• in the case of an IPO, must offer a minimum amount of securities in a firm commitment offering that would result in gross proceeds of at least $25 million;
• in the case of a business combination, must have a minimum post-closing market value of unrestricted publicly held shares (“MVUPHS”) equal to at least $25 million;
• if transferring its listing from the OTC market or from another national exchange, must have a minimum MVUPHS of at least $25 million and have traded on the other market for at least one year; and
• would be barred from direct listings on the Nasdaq Capital Market.

This targeted proposal, which if approved could have a significant chilling effect on the number of new listings by China-Based Companies, remains under SEC review. If the proposal is approved, it will make it much more challenging, and potentially more expensive, for China-Based Companies, and particularly smaller China-Based Companies, to list on Nasdaq.

Nasdaq Expands Discretionary Authority to Deny Initial Listings

Citing problematic trading in certain listed companies (including those Asia-based FPIs noted above who have recently had the trading of their listed securities halted), and noting that pending applicants, despite meeting all listing requirements, may have a profile similar to such companies, in December 2025, Nasdaq proposed a rule change that would provide it with limited discretion to deny initial listing to companies, even where the applicant meets all stated listing requirements.[11]

Under the new rules, which are currently in effect, Nasdaq can deny listing based on qualitative factors that it believes could make a security susceptible to manipulation related to concerns Nasdaq and other regulators have identified with existing FPIs that are similarly situated to the applicant or based on considerations related to the applicant’s advisors, even where the applicant meets all stated listing requirements.[12]

While applicable to all issuers, this rule change is particularly problematic for FPIs because it raises the possibility that an FPI that satisfies all of Nasdaq’s quantitative requirements could get very deep into the IPO process, and incur the related costs (including costs arising from Nasdaq’s heightened, and potentially uncertain, scrutiny of such FPI related to the novel review process), only to have its application denied due to a subjective determination that its characteristics too closely mirror those of unrelated “problematic” issuers, including, in particular, FPIs that have been the subject of trading suspensions in recent months.

New Section 16 Reporting Obligations and Exemptions

As a result of amendments that were made to Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) via the Holding Foreign Insiders Accountable Act, directors and officers – but not 10% holders – of FPIs must now file with the SEC, under Section 16(a) of the Exchange Act, reports on Forms 3, 4 and 5 to disclose their holdings and transactions involving the securities of the applicable FPI. Previously, FPIs were exempt from Section 16(a) reporting obligations. Significantly, neither Section 16(b)’s short-swing profit liability nor Section 16(c)’s prohibition on short selling by insiders were extended to directors and officers of FPIs.

The new filing requirements, which became effective on March 18, 2026, require persons who serve as directors or officers of FPIs to file a Form 3 to disclose their status as an insider, and their holdings of the securities, of the FPI. Thereafter, such persons must file a Form 4 within two business days of any transactions that they effect in the FPI’s securities, subject to limited exceptions.

On March 5, 2026, the SEC granted exemptive relief[13] from Section 16(a) reporting obligations for the directors and officers of any FPI that is (x) incorporated or organized in a “qualifying jurisdiction” (i.e., Canada, Chile, the European Economic Area, the Republic of Korea, Switzerland and the United Kingdom) and (ii) subject to insider reporting “qualifying regulations” that are substantially similar to the U.S.[14] In making an assessment as to whether the exemption applies, FPIs should note that both the qualifying jurisdiction requirement and the qualifying regulation requirement must be satisfied, though they need not be tied to the same jurisdiction. Also, it is a condition to the exemption that any director or officer seeking to rely on the exemption must be reporting their transactions as set forth under the qualifying regulation to which they are subject, and that any report filed pursuant to a qualifying regulation is made available in English to the general public within no more than two business days of its public posting.

Expedited Delisting for Low Priced Securities

On December 5, 2025, the SEC approved Nasdaq’s proposal to modify the application of Nasdaq’s minimum bid price rule in situations where the security of a listed company, including FPIs, does not maintain a closing bid price of greater than $0.10 for ten consecutive business days.[15] The new rules, which provide for an expedited delisting process and remove certain of the standard protections that Nasdaq previously applied to bid price deficiencies (such as an automatic period to regain compliance and the staying of the suspension during the pendency of a hearings panel decision), became effective on January 29, 2026.

The accelerated delisting process applies regardless of whether or not an issuer’s security is already in a cure period for non-compliance with Nasdaq’s existing minimum bid price rule (Nasdaq Rule 5810(c)(3)(A)), which requires that the securities of listed companies maintain a minimum closing bid price of at least $1.00.[16] Upon a failure to maintain a closing bid price of greater than $0.10 for ten consecutive business days, Nasdaq will issue a delisting determination letter, the applicable securities will be suspended from trading immediately, and the issuer will not be eligible for any cure or compliance period. If the issuer requests a hearings panel review, such request will not stay the trading suspension pending the issuance of a decision.

Nasdaq cited investor protection concerns in proposing the new rules, noting that issuers whose security’s price declines to $0.10 or less for ten consecutive business days are often in deep financial or operational distress and may be facing challenges that are so severe that they are not likely to regain compliance with Nasdaq’s minimum bid price requirements.

In a similar move, on December 3, 2025, NYSE American filed a proposed rule change to adopt a new $0.25 minimum trading price.[17]  As per the proposal, if at any time the closing price of a security is less than $0.25, the NYSE American will immediately suspend trading and commence delisting procedures with no cure period or the ability to submit a compliance plan to NYSE American for regaining compliance. In addition, NYSE American would have discretion to take action in situations where the issuer’s security has experienced a precipitous decline and is at an abnormally low level, even if the closing price has not fallen below $0.25. This bright line approach stands in contrast to the graduated and collaborative approach that NYSE American historically has taken with respect to low priced securities. NYSE American intends to implement the proposed rule amendments on October 1, 2026, subject to SEC approval.[18]

Expedited Delisting for MVLS Deficiencies

On January 13, 2026, Nasdaq, again citing investor protection concerns and its observations regarding companies facing conditions related to financial distress and their ability to regain compliance with Nasdaq’s continued listing requirements for the long-term, proposed rule changes regarding its Market Value of Listed Securities (“MVLS”) continued listing requirement.[19]

As per the proposal, Nasdaq would adopt Rules 5450(a)(3) and 5550(a)(6) to require that companies listed on the Nasdaq Global Market and Nasdaq Capital Market, respectively, including FPIs, maintain a minimum MVLS of at least $5 million. If a company fails to comply with the proposed MVLS requirement for a period of 30 consecutive business days, Nasdaq will issue a delisting determination letter, the applicable securities will be suspended from trading immediately, and the issuer will not be eligible for any cure or compliance period.

If the issuer requests a hearings panel review, (x) such request would not stay the trading suspension pending the issuance of a decision, and (y) the hearings panel would only be authorized to reverse a delisting decision if it determines that the delisting determination letter was in error and that the issuer never failed to satisfy the MVLS requirement.

On April 28, 2026, following the receipt of over 90 comments regarding the proposal (with a majority of those comments opposing the proposal), the SEC announced that it is instituting proceedings to allow for additional analysis of, and input from commenters with respect to, the proposal’s consistency with the Exchange Act.[20]

Conclusion

Due to the significant actions taken by the SEC and Nasdaq since the start of 2025, the outlook for FPIs has dramatically shifted, and it will continue to evolve as existing rules are amended, new rules are proposed and adopted, and new regulations are put in place. FPIs should be thoughtful and deliberate, and have the counsel of experienced and knowledgeable advisors, as they navigate an increasingly uncertain regulatory landscape. If you are a principal of, or an advisor to, an FPI that has accessed, or that is considering accessing, the U.S. capital markets, please reach out to the authors of this Legal Update, or to the other Pryor Cashman professionals with whom you work.