OTC Markets Eliminate Quarterly Legal Opinions For OTC Pink Sheets
On January 3, 2013, OTC Markets revised its disclosure requirements for issuers quoted on OTC Markets’ “OTC Pink Current Information” tier. As set forth in our January 4, 2013 blog post, these revisions reduced the filing deadline for reporting a laundry list of corporate events but eliminated the obligations of issuers to provide quarterly legal opinion letters from their securities attorneys.
About the OTC Markets Disclosure Tiers
OTC Markets Group operates an electronic inter-dealer quotation system used by broker-dealers to trade securities not listed on a national securities exchange such as NASDAQ, NYSE or AMEX.
The OTC Markets Group assigns issuers to tiers depending upon the amount of disclosure provided.
OTC Markets Pink Sheet Current Information
The “Pink Current Information” tier is available to issuers that do not file reports with the Securities and Exchange Commission (“SEC”), but voluntarily provide specific disclosures required by the OTC Markets.
This mandatory disclosure must be made using forms supplied by OTC Markets as a guide. In addition, until January 3, 2013, issuers were required to provide three quarterly legal opinions and one annual opinion from a securities attorney.
As discussed below, the January 3, 2013 revisions modify the OTC Markets requirements pertaining to attorney opinion letters.
The Securities Attorney’s Role and the OTC Markets Pink Sheet Legal Opinion
Because attorneys function as gatekeepers for the disclosure of the companies that trade on the OTC Markets platform, they, themselves, must represent in their own agreement with OTC Markets (the “Attorney Agreement”) that they have complied with the OTC Disclosure Guidelines. Attorneys who do not submit the Attorney Agreement are not permitted to render opinions for OTC Markets. Attorneys who render opinions that do not comply with its guidelines are publicly banned by OTC Markets. The Attorney Agreement requires that the attorney make the following representations:
“Section 1. Attorney hereby consents to the posting of a Letter prepared by the Attorney… through the OTC Disclosure & News Service, and OTC Markets Group [and] hereby agrees to consider permitting any such Letter to be or remain posted through the OTC Disclosure & News Service. […] Attorney will promptly notify OTC Markets Group in the event that Attorney ceases for any reason to provide services for the Issuer that would call for the preparation of a Letter in connection with information published by the Issuer through the OTC Disclosure & News Service.”
“Section 2. Attorney has attached to this Agreement (i) a list of the jurisdictions in which the Attorney is duly authorized to engage in the practice of law and (ii) a copy of the Attorney’s driver’s license for identification purposes. […]”
“Section 3. Attorney warrants and represents that (i) the document review and other duties required by the Guidelines have been competently performed in connection with the preparation of each Letter posted through the OTC Disclosure & News Service and (ii) each Letter conforms to the Guidelines.”
The OTC Markets Attorney Agreements are available for public viewing and located at http://www.otcmarkets.com/content/doc/AttorneyLetterAgreement.pdf
Securities Lawyer Opinions & the OTC Markets Pink Sheet Current
The OTC Markets legal opinion letters must be submitted using an OTC Markets form as a guide. The attorney is required to include the following information:
(1) jurisdictions where counsel is authorized to practice law;
(2) the specific documents posted by the issuer, with the date of posting. The attorney must represent that such documents contain information concerning the issuer and the securities that are publicly available through the OTC Disclosure & News Service, and must state that counsel has reviewed the foregoing information;
(3) the attorney must further represent that the information provided by the issuer (i) constitutes “adequate current public information” concerning the securities and the issuer and “is available” within the meaning of Rule 144(c)(2) under the Securities Act; (ii) includes all of the information that a broker-dealer would be required to obtain from the issuer to publish a quotation for the Securities under Rule 15c2-11 under the Securities Exchange Act of 1934 (the “Exchange Act”); (iii) complies as to form with the OTCMarkets Group’s Guidelines for Providing Adequate Current Information, which are located on the Internet at www.otcmarkets.com; and (iv) has been posted through OTCMarkets;
(4) the number of outstanding shares of the issuer and the method used to make such determination;
(5) the attorney’s attestation that he has personally met with a majority of the directors of the issuer; and
(6) whether any 5% holder or counsel is currently under investigation by any federal or state regulatory authority for any violation of federal or state securities laws.
What the Changes Mean for OTC Markets Pink Current Information Issuers and the Public
The elimination of the attorney opinion letter for quarterlies will significantly reduce reporting and compliance costs for issuers seeking the OTC Markets Pink Current tier.
As demonstrated by a string of recent SEC enforcement cases involving penny stock lawyers, many fail miserably in their role as gatekeepers for OTC Markets disclosures. The recent cases demonstrate that a significant number of penny stock and/or securities lawyers not only fail to comply with securities laws when rendering OTC Markets legal opinions, but also fail to comply with OTC Markets Disclosure Guidelines and state bar rules. These SEC actions reveal securities lawyers writing baseless legal opinions, engaging in forgery, lying about meeting with management of the issuer, and much more.
Regardless of the elimination of the OTC Markets quarterly legal opinion, OTC Markets cautions issuers and shareholders that “Federal securities laws, such as Rules 10b-5 and 15c2-11 of the Securities Exchange Act of 1934 (“Exchange Act”) as well as Rule 144 of the Securities Act of 1933 (“Securities Act”), and state Blue Sky laws, require issuers to provide adequate current information to the public markets. […] Persons with knowledge of such events would be considered to be in possession of material nonpublic information and may not buy or sell the issuer’s securities until or unless such information is made public.”
Any issuer quoted on the OTC Markets should consult with qualified legal counsel concerning the disclosures required by federal and state securities laws and proceed with caution before engaging a securities attorney who is listed on the OTC Markets banned attorney list, as well as any attorney who has been the subject of an SEC enforcement action.
More information about SEC Enforcement proceedings can be viewed at:
http://www.sec.gov/litigation/litreleases.shtml
http://www.sec.gov/litigation/admin.shtml
The OTC Markets Prohibited Attorneys list can be viewed at:
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. 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. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com
