7.2. Exchange-Listed vs. OTC Offerings

Issuers who can conduct an offering through a national securities exchange usually prefer to do so because of the enhanced prestige and liquidity that being exchange-listed provides. A national securities exchange is a securities exchange that has registered with the SEC. The two largest national securities exchanges are the New York Stock Exchange (NYSE) and Nasdaq. The Securities Act requires any company whose securities are traded on a national securities exchange to register with that exchange. The company registers by filing an application with the exchange and sending a duplicate of the application to the SEC. The application requires the company to provide information about the company’s structure, securities, and finances.

For the Series 79, you will be expected to know the listing requirements for the NYSE and Nasdaq, with a focus on the types of requirements (e.g., minimum number of shares, minimum price per share). Both exchanges have initial listing requirements that a company must meet before it can list its securities on the exchange, as well as continued listing requirements that a company must meet for its securities to remain listed on the exchange. Typically, an exchange’s initial listing requirements are stricter than its continued listing requirements.

Note: It is unlikely that the exam will ask you for specific numbers, but you will need to know the types of requirements. It is also good to know that there are no EPS or debt/equity requirements for either the NYSE or Nasdaq.

The NYSE’s initial listing requirements include:

• Initial listing fee ($125,000 to $250,000, plus a $50,000 application fee)

• Annual fees are based on the number of shares outstanding ($38,000 minimum)

• Minimum shareholders (at least 400 round lot shareholders, meaning holders of at least 100 shares)

• Minimum number of shares (at least 1.1 million shares outstanding, not counting shares