The Securities and Exchange Commission approved the stringent reverse merger listing standards proposed by three securities exchanges following a series of trading suspension of more than 35 companies in recent months due to the lack of current and accurate financial and general information about the firms. A number of these companies are formed via reverse mergers, and they are based overseas.

In the proposed rules filed by the New York Stock Exchange, NYSE-Amex, and Nasdaq, all three exchanges had proposed to include higher reverse merger listing standards with the mandatory requirements that companies must file an annual report with the SEC, be listed for at least one year on an over-the-counter or a regulated foreign exchange, a.k.a., the “seasoning” period, and keep a minimum share price of $4 in 30 out of the most recent 60 trading days.

“Placing heightened requirements on reverse merger companies before they can become listed on an exchange will provide greater protections for investors,” said SEC Chairman Mary Schapiro in a press statement.

Prior to the adoption of the new rules, reverse merger companies could pay to be listed on any exchanges and their stock could be traded freely like other operating companies. In a reverse merger, any company interested in being listed on U.S. exchanges can merge with an existing public shell company that is no longer in operation but still retains its securities listing rights. These overseas companies will pay a fee to the broker who finds them the shell company, issue shares in the shell company's name, assume its ticker symbol on the exchange, and begin selling their stock to investors.

In some cases, regulators and auditors have encountered difficulty in finding reliable information from these companies, particularly those based overseas.

Exemptions to the stringent requirements are given only if:

The listing is in connection with a substantial firm commitment to underwrite a public offering

The reverse merger was completed for a long time period; determined by the submission of at least four annual reports with audited financial information filed with the SEC