Category: OTCQB and OTCQX

OTCQB and OTCQX: OTC Markets divide issuers into three (3) levels of quotation marketplaces: OTCQX, OTCQB and OTC Pink. The OTC Pink, which involves the highest-risk, highly speculative securities, is further divided into three tiers: Current Information, Limited Information and No Information. This page provides a summary of the listing requirements for each level of quotation on OTC Markets…

Jun272017

OTC Markets Amends Listing Standards For OTCQB To Allow Non-Reporting Issuers

ABA Journal’s 10th Annual Blawg 100

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Effective May 18, 2017, the OTC Markets has amended its qualification rules for the OTCQB to allow quotation by companies that follow its alternative reporting standard (“Alternative Reporting Standard”). OTC Markets aligned the new requirements with the existing OTCQX Alternative Reporting Standard requirements. In addition, the OTC Markets made clarifying amendments to its rules, amended the rules related to the timing of removal for delinquent filers, and revised the rules for international reporting companies.

Highlights of Changes

To qualify for the OTCQB using the Alternative Reporting Standard, a company must file audited financial statements prepared in accordance with U.S. GAAP by a PCAOB qualified auditor, have a minimum bid price of $0.01, not be subject to bankruptcy or reorganization proceedings, and maintain corporate governance including (i) have a board of directors that includes a minimum of two independent directors, and (ii) have an audit committee comprised of a majority of independent directors.

Jul072015

OTC Markets Amends Listing Standards For OTCQB To Include Regulation A+ Issuers

ABA Journal’s 10th Annual Blawg 100

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OTC Markets has unveiled changes to the quotations rule and standards for the OTCQB, which changes become effective July 10, 2015.  The OTC Markets rule amendments will allow a company to use its required Regulation A+ ongoing reporting requirements to satisfy the initial and ongoing OTCQB disclosure requirements.

Concurrently with this substantive amendment, OTCQB has made clarifying general amendments to its listing standards for all listed and prospective OTCQB companies.  OTC Markets has invited comments on the proposed changes. 

To summarize, the Regulation A related amendment to the OTCQB rules and regulations includes:

  • The addition of definitions for “Regulation A” and “Regulation A Reporting Company”
  • Initial Disclosure Obligations – a Regulation A Reporting Company can meet the OTCQB initial disclosure obligations by having filed all required reports on EDGAR, including annual audited financial statements;
  • OTCQB Certification – clarifying amendment to the OTCQB Certification including that a Regulation A Reporting Company is required to
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Mar032015

SEC Suspends Trading On 128 OTC Markets Companies

ABA Journal’s 10th Annual Blawg 100

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On March 2, 2015, the Securities and Exchange Commission (SEC) suspended the trading in 128 dormant shell companies trading on the OTC Link.  The SEC suspended the trading in these shell companies because of questions regarding the accuracy and adequacy of publicly disseminated information concerning the companies’ operating status, if any.

The SEC notes in its release that OTC Markets had been unable to contact each of the issuers for more than one year.  None of the subject issuers had filed any information or updated with either OTC Markets or the SEC in over a year.   The SEC staff then independently attempted to contact the issuers and was able to contact 10 of the 128 companies and confirm from those ten that they had either ceased operations or gone private.

The trading suspensions are part of an SEC initiative tabbed Operation Shell-Expel by the SEC’s Microcap Fraud Working Group.  As part of the

Feb102015

OTC Markets Quotation Levels, Listing Requirements, and Comprehensive Pubco Criteria

ABA Journal’s 10th Annual Blawg 100

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OTC Markets divide issuers into three (3) levels of quotation marketplaces: OTCQX, OTCQB and OTC Pink.  The OTC Pink, which involves the highest-risk, highly speculative securities, is further divided into three tiers: Current Information, Limited Information and No Information.   This page provides a summary of the listing requirements for each level of quotation on OTC Markets.

OTCQX

The OTCQX divides its listing criteria between U.S. companies and International companies, though they are very similar.  The OTCQX has two tiers of quotation for U.S. companies: (i) OTCQX U.S. Premier (also eligible to quote on a national exchange); and (ii) OTCQX U.S. and two tiers for International companies: (i) OTCQX International Premier; and (ii) OTCQX International.  Quotation is available for American Depository Receipts (ADR’s) or foreign ordinary securities of companies traded on a Qualifying Foreign Stock Exchange, and an expedited application process is available for such companies.

Issuers on the OTCQX must meet specified eligibility

Oct282014

FINRA Seeks to Eliminate the OTCBB and Impose Regulations on the OTC Markets

ABA Journal’s 10th Annual Blawg 100

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On October 7, 2014, the SEC published a release instituting proceedings to determine whether to approve FINRA’s request to delete the rules related to, and the operations of, the OTC Bulletin Board quotation service.  On June 27, 2014, FINRA quietly filed a proposed rule change with the SEC seeking to adopt rules relating to the quotation requirements for OTC equity services and to delete the rules relating to the OTCBB and thus cease its operations.  Although the rule filing was published in the Federal Register, it garnered no attention in the small cap marketplace.  Only one comment letter, from OTC Market Group, Inc. (“OTC Markets”) (i.e., the entity that owns and operates the inter-dealer quotation system known by its OTC Pink, OTCQB and OTCQX quotation tiers) was submitted in response to the filing.

The OTCBB has become increasingly irrelevant in the OTC marketplace for years.  In October 2010, I wrote a blog titled

Sep082014

OTCQX Listing and Quotation Eligibility and Requirements for International Companies

ABA Journal’s 10th Annual Blawg 100

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On May 23, 2014, OTC Markets Group, Inc., published its updated OTCQX Rules for International Companies version 6.7.  This blog summarizes those rules.  A complete copy of the rules is available on the OTC Link website, otcmarkets.com.

Background

The www.otcmarkets.com divides issuers into three (3) levels: OTCQX, OTCQB and OTC Pink.

The OTCQX has two tiers of quotation for U.S. companies: (i) OTCQX International Premier; and (ii) OTCQX International.  International issuers on the OTCQX must meet specified eligibility requirements.  Quotation is available for American Depository Receipts (ADR’s) or foreign ordinary securities of companies traded on a Qualifying Foreign Stock Exchange.

International issuers on the OTCQB must either be fully reporting and current in their SEC reporting obligations or qualify for the Rule 12g3-2(b) exemption from SEC registration for foreign private issuers.  In addition, OTCQB entities must meet minimum price standards, file annual reports and pay annual fees, but do not undergo additional quality

Apr222014

OTCQX Listing and Quotation Eligibility and Requirements for U.S. Companies

On February 13, 2014, OTC Markets Group, Inc., published its OTCQX Rules For U.S. Companies version 6.5.  This blog summarizes those rules.  A complete copy of the rules are available on the OTC Link website, otcmarkets.com.

Background

The www.otcmarkets.com divides issuers into three (3) levels: OTCQX, OTCQB and OTC Pink.

The OTCQX has two tiers of quotation for U.S. companies: (i) OTCQX U.S. Premier (also eligible to quote on a national exchange); and (ii) OTCQX U.S. issuers on the OTCQX must meet specified eligibility requirements, which interestingly do not include a requirement as to being subject to the reporting requirements of the Securities Exchange Act of 1934 (“Exchange Act”) for OTCQX U.S.  Moreover, OTC Markets has the discretionary authority to allow quotation to substantially capitalized acquisition entities that are analogous to SPAC’s.

Issuers on the OTCQB must be fully reporting and current in their SEC reporting obligations, meet minimum price standards, file annual reports and pay annual fees, but do

Apr012014

OTC Markets has Modified its OTCQB Eligibility Criteria Effective May 1, 2014

 OTC Markets has unveiled changes to be quoted on the OTCQB, which changes become effective May 1, 2014.  The OTC Markets changes are designed to attract venture investors to provide more information to investors and to improve such information with Real-Time Level 2 quotes.  The OTC Markets press and informational releases related to the change concentrate on the push to create a successful venture-stage marketplace by removing underperforming companies.

Background

The www.otcmarkets.com divides issuers into three (3) levels: OTCQX, OTCQB and OTC Pink.

Issuers on the OTCQX must be fully reporting and current in their reporting obligations with the SEC and also undergo a quality review by industry professionals.  Issuers on the OTCQB must be fully reporting and current in their reporting

Jan212014

Direct Public Offering or Reverse Merger; Know Your Best Option for Going Public

Introduction

For at least the last twelve months, I have received calls daily from companies wanting to go public.  This interest in going public transactions signifies a big change from the few years prior.

Beginning in 2009, the small-cap and reverse merger, initial public offering (IPO) and direct public offering (DPO) markets diminished greatly.  I can identify at least seven main reasons for the downfall of the going public transactions.  Briefly, those reasons are:  (1) the general state of the economy, plainly stated, was not good; (2) backlash from a series of fraud allegations, SEC enforcement actions, and trading suspensions of Chinese companies following reverse mergers; (3) the 2008 Rule 144 amendments including the prohibition of use of the rule for shell company and former shell company shareholders; (4) problems clearing penny stock with broker dealers and FINRA’s enforcement of broker-dealer and clearing house due diligence requirements related to penny stocks; (5) DTC scrutiny and difficulty in obtaining clearance following

Aug132013

SEC Updates May Benefit Equity Line Financing Providers and Issuers

On May 16, 2013, the SEC updated their Compliance and Disclosure Interpretations addressing the point at which an equity line agreement can be determined to be a completed transaction for purposes of filing a resale registration statement. 

Background

Equity line financings are transactions where a company has a long-term contract to put shares to an investor (the equity line provider) at a price, generally determined by a formula based on a discount to market price.  That is, the Issuer has the right to tell the investor when to buy securities from the Issuer over a set period of time and the investor has no right to decline to purchase the securities (or a limited right to decline).  Generally, the dollar value of the