Background
Over the past few years, the historical Pink Sheets has undergone some major changes, starting with the creation of certain “tiers” of issuers and culminating in its refurbished website and new URL, otcmarkets.com.Otcmarkets.com divides issuers into three (3) levels: OTCQX, OTCQB and Pink Sheets.
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 obligations with the SEC but do not undergo additional quality review.
Issuers on the Pink Sheets are not required to be reporting with the SEC.However, such issuers are then further qualified based on the level of voluntary information provided to the otcmarkets.com.Issuers with no information are denoted by a skull and crossbones, Issuers with limited financial and business information are classified as “limited information,” and Issuers that provide information as set forth in the OTC Markets Pink Alternative Reporting Standard are denoted with a “current information” symbol.Effective January 3, 2013, OTC Markets modified its OTC Markets Pink Alternative Reporting Standard for current information status.
The New OTC Markets Pink Alternative Reporting Standard Guidelines
Effective January 3, 2013, OTC Markets has made changes to the OTC Markets Pink Alternative Reporting Standard for current information status in an effort to make it more accessible for more companies.OTC Markets has streamlined its disclosure guidelines to align them more closely with the SEC Rule 15c2-11 guidelines, to eliminate the requirement for an attorney letter where audited financial statements are provided and to reduce the requirement for attorney letters from every quarter to just once a year upon the filing of an annual report.
These changes will provide tremendous benefit for companies seeking to obtain current information status with OTC Markets.The prior Pink Alternative Reporting Standard was more analogous to an SEC registration statement than the SEC 15c2-11 guidelines.The streamlined disclosure will allow many more companies to provide current information, where they aren’t quite ready to provide the type of information required of a company subject to the SEC reporting requirements.
Moreover, the elimination of the attorney letter requirement for companies providing audited financial statements, and reducing the requirement for other entities, will likewise make the OTC Market’s current information status much more accessible. The OTC Markets attorney letter places a heavy burden on the attorney preparing the letter to verify the information contained in the letter and conduct in-depth due diligence on the Company.In cases where the Company has already incurred the expense of having audited financial statements prepared, the extra cost associated with a second legal audit proved onerous. Although attorneys who regularly prepare these letters will see a reduction in fees, I believe that OTC Markets is correct in taking this approach, which recognizes that the burden of providing full and accurate disclosure lies with the Company and its officers and directors.
The Author
Laura Anthony, Esq.
Founding Partner
Legal & Compliance, LLC
Corporate, Securities and Going Public Attorneys
LAnthony@LegalAndCompliance.com
Securities attorney Laura Anthony and her experienced legal team provides ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded issuers as well as private companies going public on the NASDAQ, NYSE MKT or over-the-counter market, such as the OTCQB and OTCQX. For nearly two decades Legal & Compliance, LLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, S-8 and S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; Regulation A/A+ offerings; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers, ; applications to and compliance with the corporate governance requirements of securities exchanges including NASDAQ and NYSE MKT; crowdfunding; corporate; and general contract and business transactions. Moreover, Ms. Anthony and her firm represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. Ms. Anthony’s legal team prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the OTC Market’s top source for industry news, and the producer and host of LawCast.com, the securities law network. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Las Vegas, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
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