OTC Pink Sheets 101 – Going Public Attorneys
Q. What are the OTC Markets OTC tiers available to OTC Pink Sheet companies?
A. Companies on the OTC Pink Sheets are assigned to one of three tiers by the OTC Markets based upon the amount of disclosure the Company provides to the public. The OTC Pink Current Information is the highest of these tiers, created for companies that voluntarily provide specific disclosures to the OTC Markets. OTC Pink Attorneys must render an opinion for the OTC Pink Current tier.
Q. Are Companies quoted on the OTC Pink Sheets required to file reports with the Securities and Exchange Commission?
A. No. OTC Pink Sheet companies are typically non-reporting issuers.
Q. How does a Company become quoted on the OTC Pink Sheets?
A. Private companies wishing to go public must locate a sponsoring market maker to file a Form 211 with FINRA, on their behalf.
Once the Form 211 is approved by FINRA, the Company qualifies to be quoted on the OTC Markets OTC Link, and assigned to the OTC Pink Current tier.
Public companies not providing information to the public may upgrade to the OTC Pink Current tier by providing annual reports for the last two fiscal years, and quarterly reports for the interim periods since its most recent annual report.
The requirements to uplist to the OTC Pink Current tier can be viewed here.
In either scenario above, the Company must also subscribe to the OTC Markets Disclosure and News Service to be quoted. In order to maintain the OTC Pink Current status, the Company must comply with the OTC Market’s disclosure requirements for the tier.
Q. What are the disclosure requirements for Companies quoted with the OTC Pink Current tier?
A. Companies with the OTC Pink Current tier must file an Annual Report, three Quarterly Reports and one opinion from the Company’s securities attorney as well as current information reports. They must all be filed through the OTC Markets service.
The OTC Markets requirements for Annual, Quarterly and Current Reports can be viewed here: http://www.otcmarkets.com/marketplaces/otc-pink
Q. Are the reports filed by OTC Pink Current Companies available to the public?
A. Yes, the reports can be viewed on the OTCMarkets’ website at www.otcmarkets.com.
Q. What is a Current Report and when is it required?
A. Current Reports report material events, and must be filed within 4 days. OTC Markets has compiled a laundry list of items that require Current Report filings. These include sales of common stock or other equity securities, material modification to the rights of shareholders, entry into or termination of a material definitive agreement, completion of acquisition or disposition of assets, mergers, changes in control of the Company, creation of a direct financial obligation or an obligation under an off-balance sheet arrangement, changes in certifying accountant or non-reliance upon prior financial statements, departures, appointments or elections of officers or directors, and material impairments.
Q. When are OTC Markets Quarterly Reports due?
A. Quarterly Reports are required to be filed 45 days after the end of each quarter.
Q. What information is required in the Quarterly Report?
A. The Quarterly Report generally requires among other things, the Company’s contact information, shares outstanding, interim financial information for the period covered by the report, Management’s discussion and analysis or plan of operation, legal proceedings, material contracts, and articles of incorporation or bylaws, or amendments thereof, that have not been previously disclosed.
Q. When is the OTCMarkets Annual Report due?
A. The Annual Report is due 90 days after the end of each fiscal year.
The Annual Report requires among other things, general information about the Company, its business, management, 5% holders, capital structure, its transfer agent, facilities, contracts with a value of over $120,000, service providers, management’s discussion and analysis or plan of operation and financial statements for two most recent fiscal periods or shorter period, if the Company or its predecessor was formed less than two years earlier. Additionally, the Company must provide detail of all securities offerings it conducted during the prior two years including the facts surrounding the offering, identity of the individual recipient, consideration paid and the exemption from registration relied upon.
The Company must also describe or attach material contracts, articles of incorporation and bylaws, a table showing any purchases of equity securities by the Company or affiliated purchasers, and a certification stating that the Company has disclosed the items set forth above.
Q. What are the requirements of the OTC Markets Attorney Opinion?
A. OTCMarkets requires that issuers and their securities attorneys, who provide the legal opinion letters to the OTCMarkets, comply with their requirements. These include that the Company’s securities attorney state it has “personally met” or had a “face-to-face” meeting with management of the issuer and that the disclosures comply with the OTCMarkets requirements.
Q. What is meant by a “face to face” meeting with management?
A. According to the OTC Markets, the “Personally Met” requirement “describes the process used by a competent securities lawyer to perform the work necessary to submit an honest and reliable letter with respect to the issuer’s disclosure posted through the OTC Disclosure and News Service. This process requires counsel to assist the issuer by participating directly in drafting the Information required under the OTCPink Basic Disclosure Guidelines. In drafting this disclosure, the attorney will examine the evidence that supports each material statement made in the Information. Some of this evidence will be physical or documentary, while other evidence will consist of oral statements made to the attorney by executive officers who participated in or directed the events described in the Information. We believe that it is essential for the attorney to interview these officers personally to confirm the material facts described in the Information and clear up discrepancies in the evidence at hand. The securities attorney will then discuss the Information with the members of the issuer’s board of directors to confirm and correct the disclosure, where necessary, so that it is a correct statement of all material facts regarding the issuer and its securities.”
Attorneys who do not comply with the OTC Markets guidelines and requirements will be banned by OTC Markets.
The OTC Markets banned attorney list can be viewed here.
For further information about the OTC Pink Current tier, please contact Brenda Hamilton, Securities Attorney at (561) 416-8956 or by email at [email protected].
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
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