By Jason Bishara
Nasdaq’s listing requirements have changed. Nasdaq’s new rule, IM-5101-3, doesn’t just add new criteria; it fundamentally changes the process. For startups trying to get listed, this is clearly a big deal, but the implications don’t end there. We could see a ripple effect in the D&O market.
What Is Nasdaq’s IM-5101-3?
As of January 17, 2026, companies must have a Market Value of Unrestricted Publicly Held Shares of at least $15 million to be eligible for listing. This is a significant increase from the previous minimum requirement of just $5 million.
However, it’s not the biggest change.
Under IM-5101-3, Nasdaq also expanded its discretionary authority to deny initial listings even if the company meets the $15 million minimum and all other criteria. Nasdaq says it may deny initial listings due to factors that make a company’s securities susceptible to manipulation. Nasdaq will consider certain factors when determining whether securities manipulation is a risk, including the company’s location, any person or entity exercising substantial influence over the company, and the company’s advisor.
According to Yahoo Finance, in the last two years, the SEC has suspended 14 Asia-based companies with IPOs on Nasdaq or the New York Stock Exchange because of market manipulation concerns.
What Do the New Nasdaq Rules Mean for Startups?
Smaller companies that just barely met the old threshold of $5 million may not qualify for an initial listing under Nasdaq’s new rules. Nasdaq’s increased discretionary authority could also cause problems for companies, and once again, smaller companies may be most affected.
In a Forbes Business Council article, Joseph Lucosky, Managing Partner of Lucosky Brookman, explains that the new Nasdaq rules don’t create risks for microcaps with smaller floats, tighter ownership structures and governance gaps, but the rules do give Nasdaq the authority to take action before a listing moves forward instead of dealing with the fallout later.
With the new rules, microcaps will have to meet the higher public float requirement. Beyond that, they’ll also have to consider whether they are likely to run afoul of Nasdaq’s more subjective requirements, and they’ll need to show that they’re resilient against market manipulation.
What Do the New Nasdaq Rules Mean for the D&O Market?
The new Nasdaq rules could result in fewer IPOs. Indeed, Reuters says several companies have already downsized, postponed or pulled their IPOs in 2026, citing valuation scrutiny along with market volatility and week peer performance as reasons.
A decrease in IPOs would result in fewer companies seeking public D&O coverage, which could impact carrier appetite and capacity.
However, a change in the number of IPOs is only one potential consequence. Market manipulation allegations can lead to significant securities litigation, and D&O Diary says risks associated with “pump and dump” schemes may be accelerating. If the new Nasdaq rules succeed in protecting investors from market manipulation, they could also impact D&O claims frequency, and that could have a significant impact on D&O underwriting losses in the long run.
In the short term, D&O underwriters may look at Nasdaq approval differently. Because it’s now more challenging to get listed, success may carry more weight than before. The larger public float is significant on its own, but the screening for market manipulation risks could be just as, if not more, important.
How Should Companies Proceed?
Any company planning an IPO in the near future should pay attention. Market manipulation and pump and dump schemes have been a growing concern, and companies are facing more scrutiny as a result, especially in the microcap market. Now with the new Nasdaq rules, the bar has been raised.
In addition to meeting the higher public float requirements, companies preparing for listing will have to consider the optics of where they’re located and who’s involved. If these details raise red flags, Nasdaq may deny the listing, even when all other requirements are met.
But there’s a bright side. Companies that succeed in securing Nasdaq approval will have made it through an increased level of scrutiny and gatekeeping, and this may appeal to both investors and D&O underwriters.
One thing hasn’t changed: It’s still important to obtain D&O insurance that fits the needs of your company. Contact the Capital Market Group at NSI for D&O coverage guidance.
