On May 14, 2026, the U.S. Securities and Exchange Commission approved Nasdaq’s proposed rule change to its initial listing standards, which will require companies primarily operating in China, including Hong Kong and Macau, to raise at least $25 million in IPO proceeds to qualify for listing on Nasdaq.
Nasdaq first submitted the proposal in September 2025, and the SEC approved it after three amendments and multiple delays.
In adopting the proposed rule change, the SEC noted that China-based companies seeking U.S. listings may present heightened fraud and market manipulation risks. From August 2022 to April 2025, about 70% of Nasdaq’s enforcement case referrals to the SEC or FINRA relating to market manipulation involved Chinese companies, even though those companies accounted for less than 10% of Nasdaq listings during that period.1Since September 2025, the SEC has suspended trading in the securities of 14 companies, many with ties to mainland China or Hong Kong, due to suspicious trading patterns.2The SEC also formed the Cross-Border Task Force within the Enforcement Division to investigate potential violations of the federal securities laws by foreign-based companies.3
Nasdaq believes that the smaller offering sizes, lower public float percentages, and limited investor base of China-based companies make their securities more susceptible to manipulation, including insider trading and pump-and-dump schemes. Nasdaq also cites concerns about potential undisclosed ownership by the Chinese government, the broader influence of Chinese authorities over the Chinese economy and Chinese companies, and the practical difficulties of enforcing U.S. laws and collecting judgments in China as reasons for adopting the proposed rule change. Given these risks, the SEC concluded that approval of the proposed rule change was appropriate.
Key Requirements of the New Rule (Nasdaq Rule 5210(l))
The new rule imposes the following requirements on China-based companies:
- IPOs: China-based companies must conduct a firm commitment offering, resulting in gross proceeds of at least $25 million to public holders.
- Business Combinations: China-based companies must have a minimum market value of unrestricted publicly held shares of at least $25 million following the transaction.
- Direct Listings: China-based companies are prohibited from listing on the Nasdaq Global Market and the Nasdaq Capital Market via direct listing. They may only pursue direct listings on the Nasdaq Global Select Market, which carries significantly higher listing thresholds.
- Transfers from OTC or Other Exchanges: China-based companies must have traded on the other market for at least one year prior to transferring to Nasdaq, and must have a minimum market value of unrestricted publicly held shares of at least $25 million.
The heightened listing standard applies to companies headquartered or incorporated in China (including Hong Kong and Macau), as well as companies whose businesses are principally administered there. Nasdaq may also apply the standard to other issuers based on a non-exhaustive list of factors, including whether:
- the company’s books and records are located in China;
- at least 50% of the company’s assets are located in China;
- at least 50% of the company’s revenues are derived from China;
- at least 50% of the company’s directors are citizens of, or reside in, China;
- at least 50% of the company’s officers are citizens of, or reside in, China;
- at least 50% of the company’s employees are based in China; or
- the company is controlled by, or under common control with, one or more persons or entities that are citizens of, reside in, or whose business is headquartered, incorporated, or principally administered in China.
The rule change will become effective mid-June.
