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NASDAQ Delisting Stay Pending Appeal Denied

Cleantech Innovations, Inc., Exchange Act Rel. 66064, December 28, 2011

Cleantech's securities were delisted by Nasdaq after the exchange concluded the company had intentionally withheld documents from its staff. Cleantech sought a stay of the delisting pending resolution of its appeal on the merits.

In ruling on these matters the Commission considers: 1) whether there is a strong likelihood the company will prevail on appeal; 2) whether absent a stay there will be irreparable injury; 3) whether there will be substantial harm to the public; and 4) whether a stay is in the public interest.

Under Exchange Act Section 19(f) the Commission must dismiss an application to review a delisting if it finds "the specific grounds on which [the delisting] … is based exist in fact, that [delisting] … is in accordance with the rules [of the exchange] and such rules are, and were applied in a manner, consistent with the purposes of [the Exchange Act]."

The Commission opinion notes that stay applicants have the burden of establishing each of the four factors noted above. It found that Cleantech had not established a strong likelihood of succeeding on appeal as the company admitted that it had not furnished all the information sought by the exchange. Because the stock was still quoted in the pink sheets if found no irreparable injury or substantial harm to the public. The Commission found that when considering the public interest disadvantages to shareholders must be weighed against the ability of Nasdaq to regulate its markets and obtain accurate information from issuers. Thus "[the detriment to shareholders] is outweighed by the public interest in the exchange's obtaining full responses from the company to the exchange's requests for information."

Cleantech also moved for discovery concerning its claim on appeal that Nasdaq had failed to follow its own procedures in delisting the stock. The Commission denied this request noting that under its Rules of Practice no discovery is permitted in appellate proceedings under Section 19(f).