Nasdaq Wants Tighter Rules for Chinese Companies Over Pump-and-Dump Schemes

The exchange has submitted proposed rules to the Securities and Exchange Commission (SEC) that would establish several requirements for new listings. These include a minimum $15 million market value of public float under the net income standard, a minimum public offering proceeds requirement of $25 million for companies mainly operating in China, and a fast-tracking process for suspending and delisting companies whose market value falls below $5 million.

“These new listing standards represent one step in a necessary, industry-wide effort—alongside regulators, U.S. exchanges, and market participants—to closely examine trading behaviors in small company securities, with the goal of safeguarding market integrity and enhancing protections for investors,” Nasdaq Executive Vice President John Zecca said in a statement.

Zecca, Nasdaq’s global chief legal, risk, and regulatory officer, said the new rules would provide a healthier liquidity profile for investors.

Nasdaq said the rule proposal came after a review of pump-and-dump schemes, also called “ramp-and-dump” stock manipulation.

According to the FBI, fraudsters in these cases control a large volume of low-priced stock and pursue schemes to drive up its price, often by posing as investment advisers or members of an investment club and advertising the stock to fellow investors. They may pressure everyday investors to act quickly based on a timely event, promising dramatic returns. After the stock price artificially rises, they dump their stock, resulting in losses for the duped investors.

“We have been looking at this area carefully and also with respect to some of the more recent meme-stock-like activities that have been tied to social media,” Zecca said.

“We have been surveilling trading activities in this area and have referred numerous cases to FINRA [Financial Industry Regulatory Authority] and the SEC for further investigation and action.

“Not all of them have compliance issues with our listing standards, but we provide information that is necessary for regulators and authorities to be able to conduct more in-depth analysis on these market behaviors.”

Since 2020, there has been a “sharp increase” of Chinese companies trying to list and raise money in the United States; 2024 set a record, and 2025 has seen a continuation of that pace, according to Nasdaq. At the same time, lawmakers and financial officers have raised bipartisan concerns about the risk to investors.

“Nasdaq has also identified concerns with the trading of companies headquartered, incorporated or whose business is principally administered in China. For example, nearly 70 [percent] of the matters that Nasdaq has referred to the SEC or FINRA since August 2022 have been related to trading in Chinese companies, while Chinese companies represent less than 10 [percent] of all Nasdaq listings,” the comment reads.

“Nasdaq believes that these concerns are due, in part, to low liquidity in these companies’ securities.”

These companies list with a small offering size, don’t attract market attention, and as a result trade in a “more volatile manner,” according to the comment.

Nasdaq reported seeing more problems with Chinese companies with an offering size below $25 million.

It proposed some criteria for determining whether companies principally operate in China: The company’s books and records are in China, Hong Kong, or Macau; at least half of its assets, revenues, and directors’, officers’, and employees’ citizenship or residency are in or derived from China; or the company is controlled by an entity that meets the above standards.

Nasdaq aims to implement the changes regarding initial listing requirements immediately upon SEC approval, and implement suspension and delisting process changes 60 days after SEC approval. If approved, Nasdaq would give companies that were already in the initial listing process 30 days to complete the process under the existing, rather than new, rules.

.