OTC Markets OTC Pink Disclosure Obligations

OTC Link Attorneys

OTC Markets Group operates the world’s largest electronic inter-dealer quotation system. Broker-dealers use it to trade unlisted securities. OTC Markets assigns issuers to one of three tiers based upon the level of disclosure provided. The OTC Pink  is used to categorize issuers who do not file reports with the Securities and Exchange Commission (“SEC”).

The OTC Pink tier comprises three sub-categories: OTC Pink Current Information, Pink Limited Information, and Pink No Information.

Secondary trading of the securities of OTC Pink Sheet issuers is facilitated only between broker-dealers. They use OTC Link, OTC Markets’ electronic trading platform.

Current SEC reporting companies and non-U.S. companies that are listed on a qualified foreign stock exchange automatically qualify for the OTC Pink Sheets Current Information tier. Issuers not reporting with the SEC must subscribe to the OTC Markets Disclosure and News Service to be quoted on the OTC Pink Sheets Current tier, and must also publicly file an initial Information and Disclosure Statement with a signed Attorney Letter Agreement by the issuer’s SEC attorney. Read More

OTC Markets Increases Disclosures By OTC Pink Issuers

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On January 3, 2013, the OTC Markets revised its disclosure requirements for issuers quoted with an OTC Markets “OTC Pink Current” tier. These revisions increase current events disclosures for a laundry list of corporate events but reduce the obligations of issuers to provide quarterly legal opinion letters from their securities lawyers.

The OTC Markets Group operates an electronic inter-dealer quotation system for broker-dealers to trade securities not listed on a national securities exchange such as NASDQ, NYSE or AMEX. The OTC Markets Group categorizes issuers into tiers depending upon the amount of disclosure provided. The “OTC Pink Current” is available to issuers who do not file reports with the Securities and Exchange Commission (“SEC”), but voluntarily provide specific disclosures required by the OTC Markets.

Issuers provide these disclosures to the public through the OTC Markets Website located at www.otcmarkets.com. Read More

OTC Markets Eliminate Quarterly Legal Opinions For OTC Pink Sheets

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On January 3, 2013, OTC Markets revised its disclosure requirements for issuers quoted on OTC Markets’ “OTC Pink Current Information” tier. As set forth in our January 4, 2013 blog post, these revisions reduced the filing deadline for reporting a laundry list of corporate events but eliminated the obligations of issuers to provide quarterly legal opinion letters from their securities attorneys.

OTC Markets Group operates an electronic inter-dealer quotation system used by broker-dealers to trade securities not listed on a national securities exchange such as NASDAQ, NYSE or AMEX. The OTC Markets Group assigns issuers to tiers depending upon the amount of disclosure provided.

OTC Markets Pink Sheet Current Information

The “Pink Current Information” tier is available to issuers that do not file reports with the Securities and Exchange Commission (“SEC”), but voluntarily provide specific disclosures required by the OTC Markets. This mandatory disclosure must be made using forms supplied by OTC Markets as a guide.  In addition, until January 3, 2013, issuers were required to provide three quarterly legal opinions and one annual opinion from a securities attorney. As discussed below, the January 3, 2013 revisions modify the OTC Markets requirements pertaining to attorney opinion letters. Read More

The OTC Markets “Face-to-Face” Meeting Requirement

OTC Markets Attorneys Face To Face
What Is A Face To Face Meeting?

The OTC Markets Group operates an electronic inter-dealer quotation system used by broker-dealers to trade securities not listed on a national securities exchange such as NASDAQ, NYSE or AMEX. OTC Markets assigns companies to tiers defined by the amount of disclosure provided.

The “OTCPink Sheets Current” is one tier available to issuers who do not file reports with the Securities and Exchange Commission (“SEC”), but voluntarily provide specific disclosures required by OTC Markets. Issuers provide these disclosures to the public through the OTCMarkets website.

The OTC Markets Requirements for Securities Lawyers

OTC Markets has established specific disclosure requirements for the Pink Sheet Current tier and requires that issuers and their securities attorneys, who provide the obligatory legal opinion letters, use forms designated by OTC Markets to provide much of the required disclosure.

The OTC Markets requires among other things that the securities lawyer state it has “personally met” or had a “face-to-face” meeting with management of the issuer. Read More

OTC Pink Uplisting – OTC Markets Lawyers

OTC Pink Lawyers
How Do I Uplist To The OTC Pink Tier?

The OTCMarkets Group operates an electronic inter-dealer quotation system called OTC Link that broker-dealers use to trade securities not listed on a national securities-related exchange.  OTCMarkets rank issuers in tiers; each issuer’s rank depends upon the amount of disclosure provided. Issuers using SEC Rule 15c2-11 qualify for the “OTC Pink Current Information” tier.

Pink Current Information Tier

The Pink Current Information tier is available to issuers who do not file reports with the SEC, but voluntarily provide specific disclosures required by OTCMarkets through its website.

OTCMarkets has established specific disclosure requirements for the Pink Current Information tier and requires that issuers use forms it has created to provide much of the required disclosure. The disclosures are similar to those found in the Form 211 and Information and Disclosure Statements. The forms can be viewed at the OTCMarkets website.

OTCMarkets allows issuers with a Pink Sheet Current tier to create their own disclosure document or simply complete the form. Once done, the issuer must submit the disclosures in PDF format and post them on the OTCMarkets website using the “Annual Report” or “Quarterly Report” report types. Read More

OTC Pink Lawyer Q & A

OTC Pink Sheet Lawyers Q&A
OTC Pink Sheets Lawyer Q&A Going Public Lawyers

Q. What are the benefits of listing on the OTC Markets OTC Pink Sheets?

A. There are a couple of benefits for companies opting to list on the OTC Pink Sheets.

Pink Sheet listings are much less expensive and the disclosure requirements are less stringent than a listing on the OTC Markets OTCQB because audited financial statements are not required. Despite that audited financial statements are not required, issuers who publish the information required by the OTC Markets Pink Sheet Disclosure Guidelines provide transparency to investors and comply with SEC Rule 15c-211.

Q. Is the OTC Markets OTC Pink Sheets a stock exchange?

A. No. The OTCMarkets Group operates an electronic inter-dealer quotation system called OTC Link, which broker-dealers use to trade OTC Pink Sheet and other securities not listed on national securities-related exchanges.

Q. How are companies categorized on the OTC Pink Sheets?

A. OTC Markets categorizes issuers in tiers based upon the level of disclosure a company provides. Read More

OTC Markets OTCQX and OTCQB Changes – OTC Markets Attorneys

OTC Markets OTCQB Lawyers
OTC Link® Introduces New OTCQX and OTCQB Pricing Effective

A diverse community of broker-dealers is the engine driving the OTC Markets electronic network-based public markets. Lower cost quoting in OTCQX and OTCQB securities will support the broker-dealers providing liquidity and execution services for their clients investing in OTCQB and OTCQX securities. The changes are designed to create a better informed and more efficient marketplace on the OTC Markets.

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Investor Relations Compliance For The OTC Markets

Investor Relations Compliance
What Regulations Apply to Investor Relations Activity?

Many companies hire third party investor relations firms to generate investor awareness. Investor relations firms are generally hired to publish favorable information about a public company to increase its stock price and trading volume. This favorable information is published using email and direct mail publications, newsletters, stock websites, press releases, stock message boards and phone rooms. Depending upon how the investor relations materials are written and published, investors may be misled into believing that a company funded promotion is from an independent source when, in reality, it is a paid advertisement. Investor relations firms that fail to comply with the securities laws, are referred to as “Stock Touts”.

Enforcement actions involving investor relations activity frequently stem from violations of the anti-fraud and registration provisions of the federal securities laws.

Stock scalping refers to secretly selling shares while telling others to purchase. Investor relations providers should make full disclosure of any intended sales during promotional campaigns in all materials published to avoid violations of the anti-fraud provisions. Read More

OTC Markets & Regulation A+ Attorneys

Regulation A+ Going Public Attorneys
Using Regulation A+ On The OTC Markets

On March 25, 2015, the Securities and Exchange Commission (“SEC”) adopted amendments to Regulation A. The new rules, known as “Regulation A+,” update and expand the existing Regulation A, and are mandated by Title IV of the Jumpstart Our Business Startups (JOBS) Act passed in 2012. Regulation A+ is effective on June 19, 2015. The rule is expected to have a significant impact on the capital raising process for small companies by allowing issuers to raise up to $50 million without all of the requirements of a public offering but potentially providing many of the benefits. OTC Markets Group recently published proposed amendments to the OTCQB Standards to conform to the SEC’s recent amendments. The OTC Markets proposed rules are scheduled to become effective July 10, 2015.

Eligibility – Regulation A Offerings

The use of Regulation A+ is limited to companies organized in and with their principal place of business in the United States or Canada.  Regulation A is not be available to companies that: Read More

Restricted Shares – The OTC Markets Attorneys

Restricted Shares 101 - OTC Markets Attorneys
Removing The Legend From Restricted Stock

It is routine for companies to mark their stock certificates with legends that set forth restrictions on transferability. Generally, legends on restricted shares  state that the securities represented by the stock certificate are not registered under the Securities Act of 1933, as amended (“Securities Act”). Restricted legends provide notice that the restricted shares represented by the certificate are not covered by an effective registration statement under the Securities Act.   As such, the restricted shares may not be resold unless they are registered or an exemption from registration is available for the resale.  This blog post addresses the most common questions we receive about selling restricted shares.

How Do Shares Become Restricted Anyway?

Restricted securities are frequently issued in private placement offerings under Rule 504, 505 and 506 of Regulation D. Restricted securities are also securities held by a company’s officers, directors and control persons. Read More

Going Public & IPO Basics For the OTC Markets

OTCQX Attorneys
Going Public – Initial Public Offering-IPO

In an initial public offering (IPO) a company offers and sells stock to the public through an underwriter for the first time. When a company cannot locate an underwriter, it may sell its own shares using a direct public offering (DPO). Any sales of common stock by the investors in the IPO or DPO are called secondary sales or a secondary offerings.

Going Public- Regulation

Offers and sales of securities in an IPO are regulated by three primary federal laws. These are the Securities Act of 1933, the Exchange Act of 1934, and the Sarbanes Oxly Act of 2002. These laws were created to protect investors.

Benefits of Going Public & Public Company Status

A few of the benefits of public company status include:

  • More access to capital;
  • Increased liquidity;
  • Exit strategy for investors and existing shareholders;
  • Ability to use stock as a currency;
  • Capital for future acquisitions; and
  • Prestige of public company status.

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What is the OTC Link® ATS?

OTC Link Attorneys
OTC Link Electronic®ATS Inter-Dealer Quote System

OTC Link LLC (OTC Link) is owned by OTC Markets Group Inc.  OTC Link is an electronic inter-dealer quotation system that displays quotes from broker-dealers for many over-the-counter (OTC) securities.  OTC Link is registered with the SEC as a broker-dealer and as an alternative trading system, and is a member of FINRA.

Most of the issuers quoted by the OTC Link are unable to meet the minimum listing requirements for trading on a national securities exchange, such as the New York Stock Exchange (NYSE) or the Nasdaq Stock Market (NASDAQ).  OTC Link® ATS is an Alternative Trading System for broker-dealer subscribers to provide investors with an electronic trading experience nearly identical to that of trading a security on a national stock exchange like NYSE or NASDAQ.  OTC Link® ATS directly links a network of U.S. broker-dealers that provide liquidity and execution services for domestic and international securities. Read More

OTCQX Listing, Eligibility & Quotation Attorneys

OTC Markets Group organizes securities into the OTCQX®, OTCQB® and OTC Pink® categories based on the level of disclosure provided and the listing fees paid by the issuer. OTCQX Quotation of a company is considered to be the highest tier offered by the OTC Markets and the most prestigious in going public transactions. OTCQX eligibility is tailored for both domestic and international companies seeking to go public.
OTCQX Listing, Eligibility And Quotation Requirements

OTC Markets Group organizes securities into the OTCQX®, OTCQB® and OTC Pink® categories based on the level of disclosure provided and the listing fees paid by the issuer.  OTCQX Quotation of a company is considered to be the highest tier offered by the OTC Markets and the most prestigious in going public transactions.  OTCQX eligibility is tailored for both domestic and international companies seeking to go public.

OTCQX International is a fully electronic interdealer quotation system affording investors and broker-dealers access through online and full-service broker-dealers in the U.S.  Trades of OTC Markets OTCQX International securities are settled and cleared in US time zones using US currency like any US-based exchange-listed security. Read More

OTC Markets OTC Pink Attorneys

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The OTC Pink Tier

OTC Markets Group operates an electronic inter-dealer quotation system called OTC Link that broker-dealers use to trade securities not listed on  a national securities-related exchange. This includes the OTC Pink Tier. OTC Markets has three OTC Pink tiers. Each issuer’s rank in the OTC Pink tiers depends upon the amount of disclosure provided. Issuers using SEC Rule 15c2-11 qualify for the “OTC Pink Current Information” tier.

OTC Pink Tiers – The Pink Current Tier

The Pink Current Information tier is available to issuers who do not file reports with the SEC, but voluntarily provide specific disclosures required by OTC Markets through its website.

OTC Markets has established specific disclosure requirements for the Pink Current Information tier and requires that issuers use forms it has created to provide much of the required disclosure. The disclosures are similar to those found in the Form 211 and Information and Disclosure Statements. The forms can be viewed at the OTC Markets website. Read More

How Much Does The OTC Markets Charge To Go Public?

OTC Markets - Going Public Attorneys
OTC Markets Listing Fees

The cost for issuers going public varies for companies seeking quotation of their securities on the OTC Markets OTC Pink and OTCQB marketplaces.  The biggest distinction is that more often that not companies who go public on the OTCQB provide more transparency to investors than OTC Pink Sheet companies because they file periodic reports and schedules with the Securities and Exchange Commission (the “SEC”).

As of May 2014, the OTC Markets imposed new requirements for OTCQB companies. The requirements include initial and continuous listing fees and minimum bid price requirements. To be quoted on the OTCQB, the issuer must be subject to SEC reporting requirements and pay initial and annual listing fees to the OTC Markets. Reporting Companies not paying the listing fee to the OTC Markets will still be quoted but with an OTC Pink tier. OTC Pink companies are both reporting and non-reporting issuers. Read More

OTCQB Listing, Eligibility & Quotation – OTC Markets Lawyers

OTCQB Going Public Attorney
OTCQB Listing, Eligibility & Quotation Lawyers

OTC Markets Group (“OTC Markets”) requires companies seeking to have their shares quoted on the OTCQB® Venture Stage Marketplace (“OTCQB”) meet certain criteria. This includes that the issuer’s securities have an initial and ongoing minimum bid price of $.01 per share, the issuer submit an initial OTCQB application to the OTC Markets, pay annual listing fees, and submit certifications to the OTC Markets on their required form.

Minimum Bid Test for the OTCQB

Requirements for OTCQB listing include; (i) the issuer must have a minimum bid price of $0.01 per share as of the close of each business day for each of the previous thirty calendar days prior to the issuer’s application date and (ii) once quoted on the OTCQB, the is required to have a bid price of $0.01 per share as of the close of the business day at least one time per thirty (30) consecutive calendar days. Read More

OTC Markets FAQ – OTC Markets Attorneys

OTC Markets Attorneys
OTC Markets Attorneys – Frequently Asked Questions

The OTC Markets offers several different tiers for companies to choose from when considering a trading venue for going public. These are the OTCQX, OTCQB and OTC Pink marketplaces. Companies that trade on the OTC Markets span a broad range of sectors, from the ADRs of large cap conglomerates to small and micro-cap growth companies, SEC reporting companies and community banks; and across all major industries, including oil and gas, medical, utilities, media, pharma & bio tech, and others. The securities quoted on the OTC Markets are traded through the OTC Market’s SEC-registered Alternative Trading System, OTC Link® ATS. OTC Markets provides flexibility for issuers going public using direct public offerings or initial public offerings.

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Does My Public Company Have to Disclose A Wells Notice?

Wells Notice Securities Attorneys

A Wells Notice is sent to subjects of a Securities and Exchange Commission (“SEC”) investigation when Enforcement staff has substantially completed its investigation and intends to recommend that an enforcement be pursued.  Under SEC Rules, in response to such a notice, the recipient is entitled to make a Wells submission presenting facts and arguments intended to dissuade the staff from taking further action.  If the staff goes forward with its recommendation the Commission will review the recommendation and the Wells submission and then decide whether to authorize an enforcement proceeding.

Accordingly, receipt of a Wells Notice does not necessarily indicate that charges will be filed.

Publicly traded companies are often faced with the dilemma of whether or not to disclose the existence of a Wells notice to the public. Read More

Form 12b-25 Q & A | OTC Markets Attorneys

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Accelerated filers, non-accelerated filers and smaller reporting companies occasionally have difficulty meeting the Securities and Exchange Commission’s (“SEC”) reporting due dates.

Rule 12b-25 adopted by the SEC under the Securities Exchange Act of 1934, provides an extension of the SEC’s reporting due dates.  This blog post contains common questions and our responses to common questions we receive about Rule 12b-25 and extensions of filing due dates of periodic reports.

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FINRA Granted Authority to Initiate Trade Halt

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Recent SEC amendments to FINRA Rule 6440, grant authority for FINRA to initiate trading and quotation halts in OTC equity securities when it is deemed necessary to protect investors.   As amended, Rule 6440 grants FINRA the authority to impose foreign regulatory halts, derivative halts and extraordinary halts.

Extraordinary Event Halt

FINRA may halt trading and quotation if FINRA determines that an extraordinary event has occurred or is ongoing, that has had a material effect on the market for the OTC equity security or the OTC ADR or has caused or has the potential to cause major disruption to the marketplace or significant uncertainty in the settlement and clearance process.

Foreign Regulatory Halt

Rule 6440, as amended, allows FINRA to halt trading and quotation in OTC equity securities if the OTC equity security or the OTC American Depositary Receipt (ADR) is listed on or registered with a foreign securities exchange or market. Read More