Letter to Committee Leaders re. Nasdaq Proposed Rule Chance SR-NASDAQ-2026-004 March 23, 20206

Dear Chairs and Ranking Members:

We write to respectfully urge your Committees to exercise their oversight authority and formally request that the Securities and Exchange Commission reject Nasdaq’s proposed rule change, File No. SR‑NASDAQ‑2026‑004, which would impose a new continued listing requirement based on a $5 million Market Value of Listed Securities (“MVLS”) threshold coupled with an automatic trading suspension after 30 consecutive business days, without any meaningful right of appeal.

As detailed in the attached expert comment letter submitted to the Commission by Donohoe Advisory Associates—one of the most experienced listing‑rules advisory firms in the U.S. capital markets—this proposal represents a fundamental departure from long‑standing exchange practice, raises serious procedural due process concerns, and would materially harm capital formation, particularly for micro‑cap and early‑stage growth companies.

Automatic Suspension Without Due Process

The proposed rule would allow Nasdaq to summarily suspend trading in an otherwise fully compliant issuer based solely on a market‑driven metric that is often outside the issuer’s control, without providing a grace period, stay, or meaningful hearing before irreparable harm occurs. This is unprecedented in Nasdaq’s modern regulatory framework.

Historically, Nasdaq has recognized that market‑based deficiencies can be temporary, and its listing rules therefore provide issuers with compliance periods—often 180 days or longer—and a right to be heard before an independent hearings panel. The proposed MVLS rule abandons those principles entirely, substituting automatic suspension for individualized review, even though the issuer may remain compliant with all other quantitative and qualitative listing standards.

The absence of any bona fide right of appeal is especially troubling. An issuer’s only permitted “challenge” would be limited to disputing Nasdaq’s arithmetic calculation of MVLS, not the appropriateness or fairness of suspension itself. In practical terms, this is no appeal at all.

Heightened Risk of Manipulation and Market Abuse

The proposal would also increase the risk of manipulative trading, particularly by short sellers targeting issuers trading near the $5 million MVLS threshold. As the Donohoe Advisory letter explains, concentrated short‑selling pressure can artificially depress share price and market value over a relatively short period, triggering suspension regardless of the issuer’s fundamentals.

Once trading is suspended and publicly disclosed, issuers routinely experience catastrophic value destruction—often 50–60 percent or more—creating a self‑fulfilling downward spiral from which recovery is unlikely. The rule would effectively guarantee that manipulators “win” once they force MVLS below the threshold, to the detriment of long‑term investors and market integrity.

Chilling Effect on Capital Formation and Innovation

The proposed rule would significantly impair the ability of small and emerging companies to raise capital, particularly in research‑intensive sectors such as biotechnology, life sciences, and advanced technology. Investors would rationally price in the risk of sudden suspension, demanding more onerous terms—or declining to invest altogether—if an issuer is anywhere near the MVLS threshold.

This outcome directly conflicts with Congress’s repeated policy objectives to support capital access for smaller issuers, promote innovation, and strengthen U.S. public markets. Rather than protecting investors, the rule would likely reduce investment opportunities, accelerate delistings, and push more companies into opaque or less‑regulated markets.

Congressional Oversight Is Warranted

We respectfully submit that no self‑regulatory organization should be permitted to adopt a rule that so clearly departs from principles of fairness, proportionality, and due process, particularly where the consequences are immediate and irreversible. The Exchange Act requires that exchange rules provide a “fair procedure” for limiting access to the markets; this proposal fails that test.

For these reasons, we urge your Committees to formally request that the SEC decline to approve SR‑NASDAQ‑2026‑004, and to encourage the Commission to require Nasdaq to assess the real‑world impact of its recent listing‑rule changes before imposing an even more draconian regime.

We appreciate your attention to this important matter and would welcome the opportunity to discuss these concerns further.

Respectfully submitted,