What are the OTC Markets Reporting Requirements?

SEC Periodic Reporting

Securities Lawyer 101 Blog

Unlike securities listed on stock exchanges such as NASDAQ or the NYSE, securities may trade through the OTC Markets interdealer quotation system whether they are a Securities and Exchange Commission (“SEC”) reporting issuer or not. There are three reporting standards for companies quoted by OTC Markets which vary depending upon the level of disclosure provided to investors.

OTCMarkets OTCQB & OTCQX Reporting Standard

Issuers in the OTC Markets 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 OTC Markets Reporting Standard may be on the OTC Markets OTCQX tier or the OTCQB tier.

OTC Markets 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 OTC Pink Current tier.

OTC Markets 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.

OTC Markets Compliance

While companies that use OTC Markets’ 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 OTC Markets 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 the OTCQX 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 OTC Pink Disclosure Tiers, symbolized by the Disclosure Tier icon on that company’s profile page at otc markets.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.

OTC Markets OTCLink

The OTC Markets Group operates an electronic inter-dealer quotation system called OTC Link. Broker-dealers use OTC Link to trade securities not listed on a national securities-related exchange. OTC Markets 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 OTC Markets. OTC Markets 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 OTC Markets website.

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.  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