Nasdaq Moves to Rein in Late Filers

Of 1,806 companies on the over-the-counter market that had a late or incomplete filing in the two years ending last August, more than 1,000 are still quoted.

The Nasdaq Stock Market has proposed that companies that miss their filing deadlines three times over a two-year period be removed from the over-the-counter market for a year, according to The Wall Street Journal.

As early as this summer, the revision to Nasdaq’s eligibility rule could remove hundreds of companies from the Bulletin Board — an electronic marketplace for companies that don’t meet the listing criteria of Nasdaq or the New York Stock Exchange — according to the paper.

The stock market made the proposal after evaluating a recent study of more than 3,000 late or incomplete filings by 1,806 companies in the two years ending last August. Fully 1,067 of those companies are still quoted, the Journal reported; they make up about one-third of all companies that trade on the Bulletin Board.

At present, Nasdaq begins the delisting process when a company misses its filing deadline for either a quarterly or annual report. Since 2000, according to the exchange, 81 companies have been delisted for filing late, including 14 companies last year.

The New York Stock Exchange generally gives companies nine months from the filing due date before they are subject to delisting, after which an NYSE committee would decide whether to grant more time. Essentially, the Big Board takes the position that a company should complete one year’s annual report before it moves on to the next.

In the past three years, according to the Journal, only five companies have needed to go past the end of the year to file their annual report. “With big firms, it makes sense to look at the facts and circumstances of each case,” James Angel, a finance professor at Georgetown University, told the Journal.

On the other hand, the newspaper pointed out, it would be difficult for Nasdaq to figure out why hundreds of companies missed filing deadlines. “If firms mess up three times, it says a lot about their internal systems and their ability to provide accurate and timely information to their investors,” Angel told the paper.

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