The SEC recently published a paper on OTC equity securities on their website. While I am always happy to see more research around OTC equities, I am surprised by the paper’s overly negative and misinformed conclusions about the growth in OTC dollar volumes.
Moreover, I am concerned that these flawed conclusions, drawn from outdated research and a study of a small group of securities subject to investigative requests by the SEC or FINRA, will be used to develop new regulations that harm capital formation. Regulatory action based on this skewed sample could negatively impact the vast majority of companies that trade successfully on the OTC Markets.
The OTC Markets are More Transparent Today
The SEC’s paper, “Outcomes of Investing in OTC Stocks,” by Joshua White, does not address the improvements in transparency and technology made over the past several years. Instead, it focuses on negative outcomes for investors of Pink companies that provide no information to the market.