Introduction

The NASDAQ Stock Market, one of the world's leading electronic stock exchanges, offers foreign companies an avenue to access U.S. capital markets, enhance liquidity, and gain international visibility. For Philippine-based companies or entities with significant operations in the Philippines seeking to list on NASDAQ, the process involves navigating a complex interplay of U.S. federal securities laws, NASDAQ-specific listing standards, and Philippine regulatory frameworks. This article provides a comprehensive overview of the legal and regulatory requirements, emphasizing the dual compliance obligations under U.S. and Philippine jurisdictions. It covers eligibility criteria, application procedures, ongoing obligations, and potential challenges, drawing on established legal principles and regulatory practices as of early 2026.

While NASDAQ listings can be pursued through direct share listings or more commonly via American Depositary Receipts (ADRs), Philippine companies must ensure alignment with domestic laws governing cross-border securities offerings, foreign investments, and corporate governance. Failure to comply can result in regulatory sanctions, delisting, or civil liabilities.

U.S. Regulatory Framework for Foreign Issuers on NASDAQ

NASDAQ operates under the oversight of the U.S. Securities and Exchange Commission (SEC), and foreign private issuers (FPIs) – defined as non-U.S. entities with less than 50% U.S. shareholder ownership and limited U.S. business presence – benefit from certain exemptions compared to domestic issuers. Philippine companies typically qualify as FPIs unless they have substantial U.S. ties.

1. NASDAQ Listing Standards

NASDAQ maintains tiered listing segments: NASDAQ Global Select Market, NASDAQ Global Market, and NASDAQ Capital Market, each with escalating quantitative and qualitative requirements.

Quantitative Requirements

NASDAQ Global Select Market: Requires a minimum market value of listed securities of $550 million (or $850 million for initial listings in certain cases), at least 1.25 million publicly held shares, a minimum bid price of $4 per share, and annual income from continuing operations of at least $11 million over the prior three years (or alternative standards based on market cap and cash flow).
NASDAQ Global Market: Lower thresholds, such as $160 million market value of publicly held shares, 1.1 million publicly held shares, $4 bid price, and equity of at least $55 million.
NASDAQ Capital Market: Entry-level tier with $50 million market value of publicly held shares, 1 million publicly held shares, $4 bid price (or alternatives), and net tangible assets of $4 million.

For foreign issuers, these metrics are applied to the global operations, but shares must be freely tradable in the U.S. market.

Qualitative Requirements

Corporate governance: Adoption of a code of conduct, independent board committees (audit, compensation, nomination), and majority independent directors.
Financial reporting: Compliance with U.S. GAAP or IFRS as issued by the IASB, with reconciliation if needed.
Shareholder approvals: For material transactions, though FPIs may follow home country practices for certain matters like equity compensation plans.

Foreign issuers must submit a listing application via NASDAQ's electronic portal, including financial statements, governance documents, and a legal opinion confirming compliance with home country laws.

2. SEC Registration and Disclosure Obligations

To list on NASDAQ, foreign companies must register securities under the Securities Exchange Act of 1934 (Exchange Act) using Form 20-F for FPIs, which requires:

Detailed business descriptions, risk factors, management's discussion and analysis (MD&A), and audited financial statements.
Disclosure of related-party transactions, executive compensation, and material contracts.

FPIs are exempt from quarterly reporting (Form 10-Q) and proxy solicitation rules but must file annual reports on Form 20-F within four months of fiscal year-end and furnish current reports on Form 6-K for material events.

ADR Programs

Most Philippine companies opt for ADRs to list on NASDAQ, avoiding direct registration of foreign shares. ADRs are certificates issued by a U.S. depositary bank representing underlying shares held in the Philippines.

Level 1 ADRs: Over-the-counter trading, minimal SEC involvement (no registration required if unsolicited).
Level 2 ADRs: Exchange-listed (e.g., NASDAQ), requiring Form 20-F registration.
Level 3 ADRs: Allows capital raising, necessitating Form F-1 or F-3 for public offerings under the Securities Act of 1933.

Sponsored ADRs require a deposit agreement, tripartite with the issuer, depositary, and holders.

3. Compliance with Other U.S. Laws

Sarbanes-Oxley Act (SOX): FPIs must comply with internal controls (Section 404), CEO/CFO certifications, and audit committee independence. Exemptions apply for non-accelerated filers.
Dodd-Frank Act: Clawback policies for executive compensation and say-on-pay votes, though FPIs can follow home practices in some areas.
Foreign Corrupt Practices Act (FCPA): Anti-bribery and accounting provisions apply to issuers with U.S.-listed securities.
Jumpstart Our Business Startups (JOBS) Act: Emerging growth companies (EGCs) – including foreign ones with less than $1.235 billion in revenue – enjoy reduced disclosures for up to five years.

Philippine Regulatory Framework

Philippine companies must obtain prior approvals and ensure compliance with local laws before pursuing a NASDAQ listing, as governed by the Securities Regulation Code (SRC), Corporation Code, and regulations from the Philippine SEC (PSEC), Bangko Sentral ng Pilipinas (BSP), and Philippine Stock Exchange (PSE) if dually listed.

1. PSEC Approvals

Under SRC Rule 68, Philippine issuers offering securities abroad must secure PSEC confirmation that the offering complies with Philippine disclosure standards or obtain an exemption.

Registration Statement: If the listing involves a public offering in the Philippines, a full registration is required, but for offshore listings like NASDAQ, a notification or exemptive relief suffices.
Cross-Border Offerings: SRC Section 8 prohibits unregistered securities offerings, but exemptions under Rule 8.1 apply for offerings solely to qualified buyers or outside the Philippines.
Disclosure Alignment: Financial statements must be PFRS-compliant, reconciled to IFRS for NASDAQ purposes.

For ADRs, PSEC requires notification of the program and ensures no violation of foreign ownership restrictions under the Philippine Constitution (e.g., 40% foreign equity limit in public utilities).

2. BSP Foreign Exchange Regulations

NASDAQ listings often involve capital outflows or inflows, triggering BSP oversight under the Manual of Regulations on Foreign Exchange Transactions (FX Manual).

Registration of Foreign Investments: Inbound investments from ADR proceeds must be registered with BSP for repatriation and remittance rights.
Outward Investments: If the listing involves Philippine funds for U.S. setup costs, prior BSP approval may be needed if exceeding thresholds.
Currency Conversion: ADR deposits require BSP clearance for converting pesos to dollars, ensuring compliance with anti-money laundering rules.

3. Corporate Governance and Tax Considerations

Corporation Code: Amendments to articles of incorporation for listing-related changes (e.g., increasing authorized capital) require stockholder approval and PSEC filing.
PSE Rules: If the company is PSE-listed, dual listing on NASDAQ requires PSE notification and compliance with continuing listing obligations to avoid conflicts.
Tax Implications: Under the Tax Code (as amended by TRAIN and CREATE Laws), dividends on ADRs may attract 15% withholding tax for non-residents, while capital gains are generally exempt. Double taxation treaties with the U.S. mitigate withholding on dividends (reduced to 10-15%).

Philippine companies must also adhere to the Revised Corporation Code's governance standards, including board diversity and sustainability reporting, which align with NASDAQ's ESG disclosure trends.

Application Process and Timeline

Pre-Listing Preparation: Engage U.S. legal counsel, auditors, and underwriters; conduct due diligence; prepare financials and governance policies.
NASDAQ Application: Submit via NASDAQ Listing Center; review period 4-6 weeks.
SEC Filings: File Form 20-F or F-1; SEC review can take 30-90 days.
Philippine Approvals: Secure PSEC exemption (2-4 weeks) and BSP clearances (1-3 weeks).
Listing: Upon approval, trading commences; total timeline 6-12 months.

Costs include legal fees ($500,000+), NASDAQ application fee ($25,000-$295,000), and annual fees ($42,000+).

Ongoing Compliance and Risks

Post-listing, obligations include:

Timely disclosures of material events.
Annual shareholder meetings (FPIs may use home practices).
Insider trading prohibitions under Exchange Act Section 16.
In the Philippines: Quarterly reports to PSEC, compliance with SRC anti-fraud rules.

Risks encompass market volatility, currency fluctuations, enforcement actions by U.S. or Philippine regulators, and class action lawsuits under U.S. securities laws. Delisting can occur for failing quantitative standards or governance lapses.

Challenges for Philippine Companies

Philippine entities face unique hurdles:

Foreign Ownership Limits: Constitutionally restricted sectors (e.g., media, land) complicate listings.
Economic Volatility: Peso depreciation impacts ADR pricing.
Regulatory Harmonization: Divergences between U.S. GAAP/IFRS and PFRS require reconciliations.
Cultural Adjustments: Adopting U.S.-style governance may conflict with family-controlled Philippine conglomerates.

Recent trends include increased scrutiny on ESG factors and digital assets, with NASDAQ proposing rules for board diversity and climate disclosures.

Conclusion

Listing on NASDAQ represents a strategic milestone for Philippine companies, but demands meticulous adherence to multifaceted legal and regulatory requirements. By balancing U.S. mandates with Philippine obligations, issuers can mitigate risks and capitalize on global opportunities. Professional advisory is essential to navigate this intricate landscape.