Sunday, February 8, 2009

Listing Levers Continued

Earlier, we discussed some of the quantitative listing requirements of the NYSE. But this list is not even close to comprehensive. Not only do the major exchanges have long lists of requirements unrelated to company size and trading volume, but many of them also reserve the right to deny any issuer a listing for no specifically listed reason. Consider Image Sensing Systems (ISNS).

One relatively recent requirement of the NASDAQ requires that each company's audit committee have three independent directors. ISNS was just meeting this requirement before the untimely death of board member Richard Magnuson. Only four days after Magnuson's death, the company received a letter from the NASDAQ informing it that it no longer meets its listing requirements! Now the company will be de-listed unless it acts fairly quickly.

The good news for investors is that they don't have to worry about checking out each company's individual corporate governance structures when they are listed on a major exchange. In some cases, however, these requirements may not go far enough. Therefore, investors must still investigate issues which are not covered by these minimum requirements.

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