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OTCQB And OTCQX Rule Changes

Effective October 1, 2020, the OTCQB and OTCQX tiers of OTC Markets have instituted amendments to their rules, including an increase in fees.

The OTC Markets divide issuers into three (3) levels of quotation marketplaces: OTCQX, OTCQB and OTC Pink Open Market. The OTC Pink Open Market, which involves the highest-risk, highly speculative securities, is further divided into three tiers: Current Information, Limited Information and No Information. Companies trading on the OTCQX, OTCQB and OTC Pink Current Information tiers of OTC Markets have the option of reporting directly to OTC Markets under its Alternative Reporting Standards.  The Alternative Reporting Standards are more robust for the OTCQB and OTCQX in that they require audited financial statements prepared in accordance with U.S. GAAP and audited by a PCAOB qualified auditor in the same format as would be included in SEC registration statements and reports.

As an aside, companies that report to the SEC under Regulation A and foreign companies that

Nasdaq Proposed Rule Changes To Its Discretionary Listing And Continued Listing Standards

On April 21, 2020, the SEC Chairman Jay Clayton and a group of senior SEC and PCAOB officials issued a joint statement warning about the risks of investing in emerging markets, especially China, including companies from those markets that are accessing the U.S. capital markets (see HERE).  Previously, in December 2018, Chair Clayton, SEC Chief Accountant Wes Bricker and PCAOB Chairman William D. Duhnke III issued a similar cautionary statement, also focusing on China (see HERE).

Following the public statements, in June 2020, Nasdaq issued new proposed rules which would make it more difficult for a company to list or continue to list based on the quality of its audit, which could have a direct effect on companies based in China.

Nasdaq Proposed Rule Changes

On June 2, 2020, the Nasdaq Stock Market filed a proposed rule change to amend IM-5101-1, the rule which allows Nasdaq to use its discretionary authority to deny listing or continued listing

Disclosures Related To COVID-19 – SEC Updates

Last week the SEC Office of the Chief Accountant (OCA) made a public statement on the importance of high-quality financial reporting for investors in light of Covid-19 on the same day that the Division of Corporation Finance issued an updated Disclosure Guidance Topic No. 9A on operations, liquidity, and capital resources disclosures related to the virus.  Disclosure Guidance Topic No. 9A supplements the previously issued Topic No. 9 (see HERE) and follows the SEC’s virtual Investor Advisory Committee (“IAC”) meeting where investors testified as to additional information that should be relayed to the capital markets by public companies (see HERE).

OCA Statement on Financial Reporting

On April 3, 2020, the SEC Office of the Chief Accountant (OCA) made its first public statement on the importance of high-quality financial reporting for investors in light of Covid-19.  At that time, many companies were in the process of preparing Q1 results and reports.  Now that Q2 is coming to a

Disclosures Related To COVID-19

The SEC has been reiterating the need for robust disclosures related to the impact of COVID-19 on publicly reporting companies.  In the last few weeks I have written about some of the guidance issued by the SEC including Disclosure Guidance Topic No. 9.  Since that time the SEC has continued to issue guidance in the form of public statements.  This blog will summarize the SEC guidance and statements on disclosures up to date, and include a sample risk factor for inclusion in SEC reports.

Public Statement by Chair Jay Clayton and Director of the Division of Corporation Finance, William Hinman

On April 8, 2020, SEC Chairman Jay Clayton and William Hinman, the Director of the Division of Corporation Finance, issued a joint public statement on the importance of disclosure during the COVID-19 crisis.

Before I get into summarizing the statement, my personal thought is that although there are many reasons why disclosure is important, including the basic premise that the

Relief For Persons Affected By The Coronavirus

Last week I published a blog summarizing the relief granted by the SEC for public companies and capital markets participants impacted by the coronavirus (Covid-19) (see HERE).  Just as Covid-19 rapidly evolves, so have the regulators response.  The SEC has now expanded the relief and issued guidance on public company disclosures related to Covid-19.

While we work to complete the usual filings while in quarantine, a new conversation is starting to develop at a rapid pace.  That is, the conversation of opportunity and the accelerating of a more technologically driven economy than ever before.  Businesses and service providers must stay nimble and ready to serve the ever changing needs of entrepreneurs and the capital markets – I know we are!

Extension in SEC Reporting Filing Deadlines

On March 25, 2020, the SEC extended its prior conditional relief order such that periodic filings that would have been due from between March 1 and July 1, 2020 can avail themselves of

OTCQB And OTC Pink Rule Changes

In December 2019 the OTC Markets updated its Pink Disclosure Guidelines and Attorney Letter Agreement and Guidelines.  The Pink disclosure guidelines and attorney letter apply to companies that elect to report directly to OTC Markets pursuant to its Alternative Reporting Standard.  Furthermore, in January 2020 OTC Markets amended the OTCQB standards related to the disclosure of convertible debt and notification procedures for companies undergoing a change in control.  The OTCQB also updated its criteria for determining independence of directors, and added additional transfer agent requirements for Canadian Companies.

The OTC Markets divide issuers into three (3) levels of quotation marketplaces: OTCQX, OTCQB and OTC Pink Open Market. The OTC Pink Open Market, which involves the highest-risk, highly speculative securities, is further divided into three tiers: Current Information, Limited Information and No Information. Companies trading on the OTCQX, OTCQB and OTC Pink Current Information tiers of OTC Markets have the option of reporting directly to OTC Markets under its Alternative

SEC Proposes Amendments To Acquisitions And Dispositions Of Businesses

In May of this year, the SEC proposed amendments to the financial statements and other disclosure requirements related to the acquisitions and dispositions of businesses.  In September 2015, the SEC issued a request for public comment related to disclosure requirements for entities other than the reporting company itself, including subsidiaries, acquired businesses, issuers of guaranteed securities and affiliates.  See my blog HERE.  Taking into account responses to portions of that request for comment, in the summer of 2018, the SEC adopted final rules to simplify the disclosure requirements applicable to registered debt offerings for guarantors and issuers of guaranteed securities, and for affiliates whose securities collateralize a company’s securities.  See my blog HERE.

The SEC is now proposing amendments to Rules 3-05, 3-14, and Article 11 of Regulation S-X and adding new Rule 6-11.  The amendments would also make several related conforming rule and form changes.  Rule 3-05 was included in the September 2015 request for comment.  Like

Forward Looking Statements Disclaimers

Forward-looking statements disclaimers appear in almost all things SEC and public company related from registration statements to reports filed in accordance with the Securities Exchange Act to press releases.  Like many disclaimers, they are usually looked past by readers, including at times by the attorneys reviewing or preparing the documents.  On many occasions we will have a new client come to the firm that has been using the same forward-looking statements disclaimer for years that has perpetually been cut and pasted into every document, and which would fail to provide the intended protections if ever tested.

The Private Securities Litigation Reform Act of 1995

Many companies start a forward-looking statements disclaimer paragraph with the sentence “[I]nformation contained herein contains ‘forward looking statements’ within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended.”  Sections 27A and 21E, both created by the Private Securities Litigation

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