OTC Markets Reporting l Securities Lawyer 101

Unlike securities listed on stock exchanges such as NASDAQ or the NYSE, securities may trade through the OTCMarkets interdealer quotation system whether they are Securities and Exchange Commission (“SEC”) reporting issuer or not.

There are three reporting standards for companies quoted by OTCMarkets which vary depending upon the level of disclosure provided to investors.

OTCMarkets OTCQB & OTCQX Reporting Standard

Issuers in the OTCMarkets Reporting Standard have either registered a class of their securities with SEC and are in compliance with SEC reporting requirements or are current in their periodic reporting requirements to a U.S. banking or insurance regulator.

Issuers following the OTCMarkets Reporting Standard may be on the OTCMarkets OTCQX tier or the OTCQB tier.

OTCMarkets International Information Standard

Rule 12g3-2(b) under the Securities Exchange Act of 1934 permits foreign issuers with securities listed on a non-U.S. exchange to make information publicly available to investors in the U.S. companies following this standard. They may be listed on the OTCQX tier or the OTCPink Current tier.

OTCMarkets Alternative Reporting Standard

When registration with the SEC is not required, publicly traded companies must still make information publicly available pursuant to Rule 10b-5 under the Securities Exchange Act of 1934 and pursuant to Rule 144(c)(2) under the Securities Act of 1933. OTCMarkets offers the Alternative Reporting Standard for companies who provide material information publicly to investors.

OTCQX Alternative Standard

OTCQX U.S. companies not registered and reporting with the SEC can follow the Alternative Reporting Standard by submitting information pursuant to the OTCQX U.S. Disclosure Guidelines. These issuers are subject to the eligibility requirements as well as terms of the OTCQX Rules for U.S. Companies. OTCQX companies must provide current and potential investors with all “material” information, which is the information necessary for an investor to make a sound investment decision. OTCQX company disclosure helps an investor of ordinary intelligence and investment skills to understand the issuer’s business and prospects.

OTC Pink Standard

OTC Pink companies may publish disclosure in accordance with the OTC Pink Basic Disclosure Guidelines. These requirements are aligned with SEC Rule 15c2-11 and are designed to give an investor the basic information a broker-dealer must maintain in order to initiate a quote in an OTC equity security.

OTCMarkets Compliance

While companies that use OTCMarkets’ quotation system may elect to make limited or no disclosure, the Alternative Reporting Standard offers an appealing level of transparency without incurring the greater effort and expense associated with becoming an SEC filer.

In order to qualify for the Alternative Reporting Standard, an issuer must publish its financial reports and other material disclosure on the OTCMarkets website, where it will be available to the public.

Any company that follows the Alternative Reporting Standard and posts an annual Attorney Letter, pursuant to Attorney Letter Guidelines, will be assigned to the Current Information tier.

OTC issuers that demonstrate their commitment to investors by providing timely disclosure and meet theOTCQX U.S. Qualification Standards or the OTCQX International Qualification Standards are eligible to apply for the OTCQX tier.

Benefits of the OTCMarkets Alternative Reporting Standard

A company that provides the information required by the Alternative Reporting Standard offers material information to the public through the OTC Disclosure and News Service. A company’s level of public disclosure determines the company’s classification in the OTCPink Disclosure Tiers, symbolized by the Disclosure Tier icon on that company’s profile page at otcmarkets.com.

Issuers following the Alternative Reporting Standard demonstrate compliance with Federal and State securities laws and thereby reduce their risk of violating SEC Rules 10b-5 and 10b5-1 of the Securities and Exchange Act of 1934.

OTCMarkets OTCLink

The OTCMarkets Group operates an electronic inter-dealer quotation system called OTCLink. Broker-dealers use OTCLink to trade securities not listed on a national securities-related exchange. OTCMarkets ranks issuers in tiers; each issuer’s rank depends upon the amount of disclosure provided. Issuers using SEC Rule 15c2-11 qualify for the “OTC Pink Current Information” tier. Pink Current Information is available to issuers who do not file reports with the SEC, but voluntarily provide specific disclosures required by OTCMarkets. OTCMarkets has established specific disclosure requirements for the Pink Current Information tier and requires that issuers use forms created by them to provide much of the required disclosure. The disclosures are similar to those found in the Form 211 and Information and Disclosure Statements. These forms may be viewed at the OTCMarkets website.

This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 , IPO’s, OTC Pink Sheet listings,Form 10 OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or info@securitieslawyer101.com. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
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Boca Raton, Florida 33432
Telephone: (561) 416-8956
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