Gregg Jaclin on What Happens After the SEC Agrees to Take a Second Look

By Gregg Jaclin

The Securities and Exchange Commission's September 11 order on Nasdaq's $5 million listing rule was reported mostly as a pause: the rule stayed on hold, and small-cap companies near the line could exhale. Gregg Jaclin, Managing Director at Exchange Listing LLC, has been involved in the Small Public Company Coalition's challenge to the rule, and his account of the order describes the start of a second, narrower contest.

The rule would delist any Nasdaq company whose market value of listed securities stays below $5 million for 30 consecutive business days, with no cure period. SEC staff approved it on July 22. The coalition and Cemtrex, Inc. asked the full Commission to review that approval, and in September the Commission agreed. In written remarks shortly after the order, Jaclin laid out what the decision does, what it leaves unchanged and how companies on either side should conduct themselves while the Commission works.

What the SEC's Grant of Review Means

Jaclin reached for a courtroom comparison. "The SEC's order granting the petition for review functions somewhat like a cert petition at the Supreme Court," he wrote. It places the matter "in front of the Commission for a full merits review of the same arguments" raised in the original petitions.

The comparison carries a caution. When the Supreme Court agrees to hear a case, it has decided only that the case deserves its attention. Mayer Brown made the same point about the stay that preceded the order, calling it "procedural and temporary, not a substantive ruling against the rule."

What the order does change is the rule's status in the meantime. "The stay on the rule's implementation will remain in effect during this full merits review," Jaclin wrote, which matches the Commission's own language that the approval "shall remain stayed pending further order of the Commission," according to the order published in the Federal Register.

Why the Record for the Nasdaq Rule Is Largely Closed

A second look starts from what is already on file. Jaclin wrote that the ruling "will be conducted on the existing record," and that parties "should not expect to add in any more information at this stage."

That record is substantial. It includes Nasdaq's historical testing of the rule, the coalition's economic analysis by former SEC chief economist Craig M. Lewis, and the commenter concerns summarized at length in the SEC's approval order. Statements filed now can argue from that record, but a company that kept its own data out of the comment period cannot easily add it at this stage, which makes the earlier stages of an exchange rulemaking more consequential than most issuers assume.

How the Second Stage of the Review Works

The next step turns on a filing Jaclin described as the center of the whole review. "It's better to think of this as our real, substantive legal brief, much like a merits brief filed at the Supreme Court," he wrote of the written statement each side submits.

Timing ran off the Federal Register. The clock "does not start running until the SEC's order granting the petition for review … is formally published in the Federal Register," Jaclin wrote. Publication came on September 15, and the statements were due October 6.

Both sides file at once. Opponents and supporters of the rule "will file their statements on the same day," Jaclin wrote, and "there does not appear to be a right to file a reply brief." Oral argument is possible but uncommon: "it appears that argument is rarely granted for this type of review."

For anyone used to litigation, the format is compressed. Each side gets one written submission, filed simultaneously, with no guaranteed chance to answer the other.

Who Else Can Be Heard

The review is open beyond the companies that started it. "SEC Rule 431 allows any interested party, not just SPCC or the other parties that filed petitions for review," to file a statement, Jaclin wrote. The rule itself opens the door in both directions, allowing "any party or other person" to file a statement "in support of or in opposition to" the staff's action.

That openness is easy to overlook. A listed company with a concrete stake in a rule does not need to be a petitioner, a coalition member or a law firm client to be part of the record the Commission reads.

Why Jaclin Counsels Restraint While the Commission Decides

The most transferable part of Jaclin's analysis concerns what to say in public while a regulator is deciding. His first point was about expectations. "The grant is [a] procedural victory, but not yet a lasting win," he wrote, and any public statement "should be careful to not characterize this order granting review as the SEC agreeing" with the petitioners' arguments, which is "not an accurate summary at this stage."

His second was about permanence. "Anything said publicly can end up quoted back in the proceeding or elsewhere," Jaclin wrote. He suggested a message that stays neutral, along the lines of being "pleased that the Commission will take a closer look at the rule," rather than predictive or argumentative.

His third was about tone toward the decision makers: avoid "public criticism of the SEC, the Division, or Nasdaq specifically tied to the pending review." Statements that "might read as trying to pressure the Commission while it is actively deciding the issue should be avoided," he wrote.

The advice applies well beyond this rule. A favorable procedural turn is tempting to announce as a win, and a press release that overstates an order can end up in front of the same regulator it describes.

What Comes Next for Nasdaq's $5 Million Rule

The Commission now has the petitions, the statements filed on October 6 and the record built over the past eight months. Until it acts, Nasdaq cannot enforce the standard. A parallel NYSE American proposal for its own $5 million market capitalization test is pending separately, with a Commission decision due by November 15, 2026.

Gregg Jaclin's account leaves companies with a narrow but practical reading of the moment. The rule is paused, the argument is mostly made, and the next development will come from the Commission on its own schedule.