FINRA

New FINRA Rules For Corporate Actions

Effective September 27, 2010, the SEC has approved new FINRA Rule 6490 (Processing of Company Related Actions). Rule 6490 requires that corporations whose securities are trading on the over the counter market (OTCQX, OTCQB, OTCBB or PinkSheets) timely notify FINRA of certain corporate actions, such as dividends, forward or reverse splits, rights or subscription offerings, and name changes. The Rule grants FINRA discretionary power when processing documents related to the announcements, and implements fees for these services.

FINRA and the OTCBB

FINRA (the Financial Industry National Regulatory Authority) operates the OTC Bulletin Board and processes corporate actions for changes such as splits and name changes. FINRA also issues trading symbols to over the counter (non-exchange) traded issuers and maintains a symbols database for issuers. When processing by FINRA of a corporate action is complete, FINRA notifies the OTC marketplace of such changes and actions, such as repricing securities following a forward or reverse split, or issuing a new trading symbol

December 13, 2010

Has The OTCBB Been Replaced By The OTCQX And OTCQB?

Over the past few years, the historical “PinkSheets” has undergone some major changes, starting with the creation of certain “tiers” of issuers and culminating in its newly refurbished website and new URL www.otcmarkets.com. Where the term “PinkSheets” used to denote an over the counter quotation system using the website www.pinksheets.com it now simply refers to the lower tier of entities that trade on the over the counter market. In fact the URL www.pinksheets.com no longer exists with users being redirected to the new www.otcmarkets.com.

Three Levels of Reporting

The new www.otcmarkets.com divides issuers into three (3) levels: OTCQX; OTCQB and PinkSheets. The new website also provides quotes for the OTCBB but it seems this is just more as a comfort or segue until the industry gets used to the idea that the “bulletin board” is no more. The OTCBB has no particular listing or quotation requirements other than that the issuer be subject to the reporting requirements of

December 9, 2010

New FINRA Requirements for Corporate Actions Require More Thorough Documentation on Behalf of Issuers

If you are a private company looking to go public on the OTCBB, securities attorney Laura Anthony provides expert legal advice and ongoing corporate counsel. Ms. Anthony counsels private and small public companies nationwide regarding reverse mergers, corporate transactions and all aspects of securities law.

As of December 1, 2008, the Financial Industry Regulation Authority (FINRA) began a new policy for effectuating corporate actions for OTCBB quoted and traded securities (securities quoted and traded on the Over the Counter Bulletin Board and the PinkSheets). Corporate actions include anything that would require notification to FINRA and the issuance of a new trading symbol, such as a name change, reverse or forward stock split.

Prior to the initiation of the new procedures, Issuers making corporate changes were only required to submit a short cover letter explaining the action and providing the new CUSIP number. In addition, they were required to submit a copy of the documents evidencing the corporate action, including board

October 19, 2009

Potential Impact of Rule SEC Release #34-60515 Regarding Proposal to Extend Regulation NMS Coverage to OTC Securities

FINRA, in August of 2009, filed Release No. 34-60515 with the SEC. FINRA proposes to extend certain NMS protections to quoting and trading in the OTC market for equity securities.

In summary:

Restrictions on sub-penny quoting;
Prohibitions on locked or crossed markets;
Implementation of caps on access fees;
Requirements of transparency of customer limit orders.

FINRA’s goals, part of broadly anticipated changes in financial systems, are proposed as part of efforts to both modernize and achieve higher “quality” in the OTC marketplace.

1. Sub-Penny Quote Restrictions

FINRA addresses both issues of modernization and higher quality by proposing to restrict sub-penny quoting in conjunction with removing the requirement that ATS’s include non-subscriber access fees within its quote. Restricting sub-penny quoting may help prevent the practice of “stepping ahead” of displayed limit orders by trivial amounts.

The proposal will most effect small businesses whose securities trade for under $1.00. Under FINRA’s proposal, market participants will be able to quote in increments ranging

October 7, 2009

Market Makers Rely on Due Diligence in Reverse Mergers

Following approval of the 15c2-11 application by FINRA, and the consistent quotation of a company’s securities, market makers may “piggy back” on the approved and completed 15c2-11. In short, a market maker may quote the share price of the Bulletin Board Shell while relying on the due diligence of other market makers and the company’s current SEC filings.

Although highly technical, the due diligence process can be completed quickly and thoroughly by an experienced securities attorney; the key is knowing where to look and what to look for. For example:

All articles and amendments are ordered from the company’s state of domicile and reviewed for procedural correctness and historical understanding.
DTC (the Depository Trust Company) is contacted to confirm the company is in a transferable status.
In addition to financial statement review, using several proprietary online search services, the firm conducts comprehensive debt and litigation searches to identify any miscellaneous debts as well as pending or past litigation.
A tax

October 3, 2009

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Financial Industry Regulatory Authority (FINRA)

New FINRA Rules For Corporate Actions

Has The OTCBB Been Replaced By The OTCQX And OTCQB?

New FINRA Requirements for Corporate Actions Require More Thorough Documentation on Behalf of Issuers

Potential Impact of Rule SEC Release #34-60515 Regarding Proposal to Extend Regulation NMS Coverage to OTC Securities

Market Makers Rely on Due Diligence in Reverse Mergers

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