Understanding the September 28 Amended Rule 15c2-11 Deadline

Understanding the September 28 amended Rule 15c2-11 Amendments

As the summer of 2021 enters its final months, investors in the U.S. over-the-counter market and OTC issuers themselves await the rollout of the amended Securities and Exchange Commission (“SEC”) Rule 15c2-11 on September 28. The rule is vital to the penny stock market: no OTC security can begin trading until a market maker sponsors it by filing a Form 211 with the Financial Industry Regulatory Authority (“FINRA”). Once the form is processed, the sponsoring market maker can request a trading symbol and begin to quote the stock. For 30 days, he has exclusive rights to market making in that issue; subsequently, additional market makers may join in without filing their own Forms 211. That is known as the Piggyback Exception.

Why Is a New Rule Needed?

Rule 15c2-11 was introduced in 1971 and was last substantially modified in 1991. Since then, the OTC Market has changed dramatically, largely thanks to the rise of the internet. By 1995, inexpensive online trading was readily available; the high commissions that had once discouraged frequent trading disappeared. The Pink Sheets and the OTCBB, once-sleepy backwaters, turned into gold rush towns crowded with gamblers willing to take a chance on the latest can’t-miss play. Microcap fraud increased by leaps and bounds.

The SEC and FINRA were concerned. Rule 15c2-11 contained a stipulation requiring the stocks that traded pursuant to it to maintain “current information,” but it was unclear how that should be monitored or by whom. Every issuer’s Form 211 contained such information at the time it was submitted to FINRA by its sponsoring market maker, but once it began trading and the Piggyback Exception kicked in, it would continue to trade forever, whether it made any public disclosure or not. Even OTC companies required by the Securities and Exchange Act of 1934 (“Exchange Act”) to submit regular financial reports often neglected to do so after their first few years in the market. They traded on the OTCBB (“Over-the-Counter Bulletin Board”), which was run without much enthusiasm by FINRA. In 1999, the SEC demanded that all OTCBB companies become current SEC filers; those that failed to do so would be delisted to the Pinks. If the regulator imagined that would cause delinquent issuers to reform, it was sadly mistaken. Large numbers of issuers willingly went Pink, and a great many of them enjoyed their liberation from even the suggestion that they provide “current information.”

In 1998 and 1999, the SEC made a serious attempt to amend Rule 15c2-11 in ways that would force public companies to provide at least minimal disclosure, but its proposals were so unpopular with issuers and investors that they were not adopted. 

It was at this time that OTC Markets Group, which would become a major force in the microcap arena, was created. It purchased the National Quotation Bureau, which published the Pink Sheets. Coincident with the avalanche of companies getting the boot from the OTCBB, the new Pink Sheets launched an electronic trading platform for OTC stocks called “Pink Link” (now OTC Link). It attracted market makers by offering electronic trade execution and by not charging them fees, unlike FINRA’s OTCBB. It attracted issuers by creating a website that displayed trading activity and allowed them to display news and other information they wished to disclose. Over the years, OTC Markets’ Disclosure and New Service would become the go-to source for information about OTC companies.

Current Information

Twenty years after its last attempt to amend Rule 15c2-11, the SEC determined to try again. On September 25, 2019, it announced a proposed rule for the Publication or Submission of Quotations Without Specified Information; that is, for the publication of quotations for securities in a quotation medium other than a national exchange. Those would be OTC securities. The regulator announced a comment period ending on 30 December. Despite that hopeful deadline, it received comments well into the next year, including four from OTC Markets. 

On September 16, 2020, the final rule was announced. While it, like all SEC regulations, would officially become effective 60 days after its publication in the Federal Register, the compliance date would be nine months after the effective date for most of the rule. And so, it was determined that the OTC markets would feel the impact of the amended rule on the morning of September 28, 2021.

Initially, the Commission considered eliminating the Piggyback Exception entirely, which would have meant each market maker trading a stock would have to submit his own Form 211 for every OTC stock he dealt in and would also be obliged to make certain the issuer was providing current information at least every 16 months. That idea was rejected fairly quickly, as it would have added to the market makers’ workload to the extent that might cause them to refuse to file 211s. That, in turn, would have led to the delisting of many OTC issuers to the Grey Market, an illiquid desert where penny stocks go to die. 

One of the most significant provisions of the amended rule addresses that issue. Starting at the end of September, market makers preparing Forms 211 will be allowed to draw not only on SEC filings posted at EDGAR for reporting companies but also on disclosures provided by issuers on the websites of Qualified Interdealer Quotation Systems (“IDQSs”). In both cases, they need not copy the documents they want to cite in their presentations to FINRA; they need only include the relevant URLs.

While there are several IDQSs, obviously, OTC Markets is the most prominent and best known to issuers and investors. For the past two decades, OTC Markets has been trying to persuade the companies using its services to become more transparent. It encourages that by creating a series of “tiers” intended to indicate a company’s level of disclosure. At the bottom of the Pink section is “Pink No Information,” then “Pink Limited Information,” and “Pink Current Information.” The more prestigious OTCQB and OTCQX tiers require what is, in most cases, more extensive disclosure; the companies assigned to them need not be concerned about compliance with the amended rule. 

How Will the Amended Rule 15c2-11 Work?

As explained above, right now, if a company wishes to trade as an OTC issuer, it must first find a sponsoring market maker willing to review the company’s information and file a Form 211 with FINRA. FINRA will then open discourse with the market maker, asking for clarification of what was submitted or additional information. This process can be quite time-consuming. Eventually, any remaining questions will have been resolved, and the company’s stock will begin to trade. After a month, additional market makers can piggyback on the original Form 211. 

After September 28, it will still be possible for a company to take that route. But there’s a catch. FINRA Rule 5250 prohibits market makers from accepting remuneration for filing a Form 211: “No member or person associated with a member shall accept any payment or other consideration, directly or indirectly, from an issuer of a security, or any affiliate or promoter thereof, for publishing a quotation, acting as a market maker in a security, or submitting an application in connection therewith.” For that reason, many market makers are reluctant to file Forms 211 for companies uninterested in paying them for services for which they may legally be compensated. 

There will soon be an alternative to trying to persuade a market maker to help. The company can now ask OTC Markets to perform what it calls an Initial Information Review. Once OTCM has completed its review, it will announce the fact and that it believes the company complies with Rule 15c2-11. According to Dan Zinn, OTC Markets’ general counsel:

Then any broker can begin quoting that security; no guarantee that a broker will, but any broker can come in and start quoting that security. And then we have compliance obligations on the back end, as between us and FINRA, but those …don’t involve whether a company can start to be quoted. Once we make that determination, the quote will open up.

As we shall see, the process may, in the end, not be quite that simple, but it will still be much easier. Our own experience indicates that right now, it can be extremely difficult for a new issuer to find a sponsoring market maker. These companies will have to deal with OTC Markets in any case; with the new rule requiring current information, they’ll need to post-disclosure using OTCM’s News and Disclosure Service. As described by Zinn, becoming the quoted should be quick and seamless. 

What Will Happen to Non-Compliant Issuers on September 28?

Since early this year, investors and penny players have been increasingly anxious about companies that will be deemed not to have “current information” at the end of September. Oddly, those companies’ exact fate has not been clear until now.

Pink Current Information companies have no cause for concern. Some provide adequate disclosure to OTC Markets; others are SEC reporters that, for reasons of cost, choose the Pink Current Info tier over the OTCQB. Pink Limited Information companies will still be quoted as well. OTCM has revised its standards for Pink Limited; the tier now requires the least amount of disclosure needed to qualify as compliant with Rule 15c2-11. 

To qualify as Pink Current Info, issuers must supply to OTCM: Annual and quarterly reports prepared according to U.S. GAAP or International Financial Reporting Standards (IFRS), but they need not be audited. The reports must include a balance sheet, statement of income, statement of cash flows, statement of retained earnings (statement of changes in stockholders’ equity), notes, and an audit letter, if applicable. The issuer must also file disclosure information, for which OTCM provides a fillable form. 

If the company does not have its financial reports audited, it must hire a qualified attorney to file an “Attorney Letter with Respect to Current Information.” It must also verify its profile through OTCIQ, another service provided by OTC Markets. The profile information must include a complete list of officers, directors, service providers, outstanding shares, a business description, and contact information.

Needless to say, the reports must be provided on an ongoing basis, with quarterlies due within 45 days of the quarter end and annual reports within 90 days of the fiscal year end. Attorney letters must be submitted yearly, within 120 days of the fiscal year end. The company profile must be reviewed and verified every six months.

If a Pink Current Info company fails to do all of the above, it will be demoted to the Pink Limited Information tier. Limited Info companies must provide only an annual report dated within the preceding 16 months. The report must contain the elements required of annual reports for Current Info companies. No attorney letter is required, but the company’s profile must be verified every six months. The annual reports must be supplied on an ongoing basis.

But what of the Pink No Information issuers? And how many are there? OTC Markets itself has said that “approximately 2,800 securities will be removed from the publicly quoted market” on September 28. 

Where will they go? 

The Expert Market vs the Grey Market

In early July, OTCM reported confidently at a webinar hosted by General Counsel Dan Zinn and Associate General Counsel Cass Sanford that on September 28, Pink No Info issuers would be moved to the Expert market. It now appears that will not be happening; they will instead move to the Grey Market, which has a long and undistinguished history.

An OTC issuer will automatically lose compliance with Rule 15c2-11 if there are no published quotations for its stock for four consecutive trading sessions. That has been the case since the 1980s, and it will not change in the amended rule. It can happen for one of two reasons: the stock is suspended for 10 trading days by the SEC, or it’s halted by FINRA for more than four sessions, or there’s so little public interest in it that it doesn’t trade at all, and its market makers simply leave. The stock of all issuers that lose compliance with Rule 15c2-11 is moved to the Grey Market. There, trades usually become increasingly infrequent; in the end, they may dry up almost entirely, and FINRA will put the stock out of its misery, deleting the ticker as an “inactive issue.”

To make matters worse, the Grey Market does not feature electronic trade execution. Trades are executed by telephone, and market makers have no obligation to lend a hand unless they want to. They cannot, of course, make a market in any Grey issue. OTC Markets clearly believes that’s inefficient and pointless. Even before the SEC published its proposed rule for amendments to Rule 15c2-11, OTCM was giving serious thought to a new “Expert Market.” On April 23, 2019, they noted the Addition of the Expert Market Tier” to the site. In the glossary found at its website, it offered a definition: 

The Expert Market is a private market to serve broker-dealer pricing and best execution needs in securities that are restricted from public quoting or trading. Restrictions can be based on issuer requirements, security attributes, investor accreditation and/or suitability risks.

By late summer 2019, OTC Markets was using the Expert Market to trade a number of stocks. It is unclear how or why they were chosen for the tier change; not all Grey companies made the cut. OTCM never announced its new creation. And when the SEC’s proposed rule appeared in September of that year, it contained no reference to any Expert Market. Yet more and more issuers were introduced to it. Sometimes they allowed market makers to publish unsolicited quotations, which meant there was nothing to distinguish these former Grey Market stocks from Pink No Info issuers. 

In its comment letters on the proposed rule, OTC Markets introduced its idea for the new Expert Market and advocated for it, without mentioning it was already in operation. In the final rule, the SEC acknowledged the suggestions, saying:

The Commission believes that, under certain conditions and circumstances, it could be beneficial to establish an “expert market” that would enhance liquidity for sophisticated or professional investors in grey market securities, as well as for small companies seeking growth opportunities that might prefer to be quoted in a market limited to such persons. To facilitate the formation and implementation of such a market, the Commission has the authority to issue exemptive relief by order pursuant to Section 36 of the Exchange Act and paragraph (g) of the amended Rule that is necessary or appropriate in the public interest, and is consistent with the protection of investors. In this regard, the Commission may consider, among other things, the types of investors who could access quotations in this market and the types of securities that would be quoted in such a market.

It was not until several months later that OTCM sought the exemptive relief suggested. It did so in a letter to the SEC’s Division of Trading and Markets dated December 21, 2020. In the letter, OTCM asks that its Expert Market be exempted from Rule 15c2-11’s “current information” requirement for companies for which quotations are published. It explains that although at this time, only broker-dealers can see Expert Market data, including quotes, it would like permission to distribute quotes to broker-dealers and other market data distributors “that agree to contractual and data access restrictions in an MDDA that limits the distribution and display of quotations to certain eligible investors, as described in the following section. Accordingly, real-time and delayed quotations published or submitted on the Expert Market will not be permitted to be distributed or displayed to the general public.”

The additional types of investors to which Expert Market data would be provided are qualified institutional buyers, accredited investors, qualified purchasers under the Investment Company Act of 1940, and foreign brokers or dealers. Quotations would also be sent to the issuer if it contractually agrees not to distribute the quotations, directly or indirectly, to anyone, not a current officer, director, or employee.

OTC Markets promises it will remove quotations for any Expert Market issuer “that becomes subject to a trading suspension or registration revocation order or is identified by OTC Link LLC as “defunct.” (In the case of issuers whose registration has been revoked, OTCM wouldn’t have a choice: such companies no longer have publicly traded securities, as the SEC notes in its response.) For formerly-suspended companies, a warning flag will be displayed for two years, even should the company achieve a different tier status after some time has passed. Oddly, OTCM adds that it believes “the inability of retail investors to view real-time and delayed quotations in the Expert Market should minimize instances where such investors are induced to purchase securities as a result of viewing the ‘pump’ in a pump-and-dump scheme.” It is difficult to understand the thinking behind that statement. Pump and dump schemes depend on creating excitement through “news,” and manipulating volume and price to greater heights. While players would no doubt prefer to see quotes, if the story’s right, they’ll do without. After all, they can see time and sales throughout the trading session, and if volume is heavy, that will serve them well enough. 

On December 22, 2020, the day after OTC Markets requested exemptive relief from the Division of Trading and Markets, the SEC filed its own Notice of Proposed Conditional Exemptive Order Granting a Conditional Exemption from the Information Review Requirement of Amended Rule 15c2-11(a)(1)(i) and the Recordkeeping Requirement of Amended Rule 15c2-11(d)(1)(i)(A) under the Securities Exchange Act of 1934 for Certain Publications or Submissions of Broker-Dealer Quotations on an Expert Market. In the text of the notice, it explained OTC Markets’ request for exemptive relief for its Expert Market and set a comment period ending on February 11, 2021. 

All in all, the SEC’s Notice seemed sympathetic to OTC Markets’ objectives for its Expert Market. Zinn contributed his own comment on July 15, pointing out that the Expert Market will be urgently needed when compliance with the amended Rule 15c2-11 is required on September 28, and, perhaps, a majority of the 2,800 OTC companies currently lacking current information lose their quotations. Zinn closed by stressing the urgency of the matter and urging the Commission to “approve the Proposed Order as expeditiously as possible in advance of the impending September 28th compliance date.”

Unexpectedly, on August 2, staff of the Division of Trading and Markets issued a brief statement in which it said only:

This proposed order is not on the Chair’s agenda in the short term. Accordingly, on September 28, 2021, the compliance date for the amendments to Rule 15c2-11, we expect that broker-dealers will no longer be able to publish proprietary quotations for the securities of any issuer for which there is no current and publicly available information, unless an existing exception to Rule 15c2-11 applies.

And so, unless something changes in the brief time left before September 28, all those Pink No Information companies are destined for the cold and lonely Grey Market. 

Shell Companies

Shell companies were originally intended to be among the chief victims of the new Rule 15c2-11. Many are companies no longer engaged in any business; some have been abandoned by management. Quite a few private companies choose to go public through reverse mergers with dormant shells; they believe it’s a cheaper and faster way to start reaping the benefits of public company status. That is not necessarily the case. While it often (though not always) is faster, it can be quite expensive, costing upwards of $100,000 even for a non-reporting shell, with the cost of the merger transaction factored in. For the money, the new issuer, often inexperienced, may find himself buying a pig in a poke: the shell may have skeletons in the closet in the form of undisclosed debt, former insiders with large undeclared positions, and more. Less naïve potential management may buy shells simply to conduct illegal and destructive pump and dump operations.

The SEC has never liked any of that. For several years, it attempted to deal with dormant shells by bringing mass suspensions at least once annually as part of what it called Operation Shell Expel. The program ran from 2012 through 2016. It was then inexplicably abandoned. In its heyday, it had been extremely successful. One well-known shell vendor sold his portfolio of shells that had suddenly become Grey at fire-sale prices. Others simply stepped away from the business.

But by 2017, the shell peddlers were back with a vengeance. Many got control of abandoned shells through custodianship actions brought in local courts in the state (usually Nevada or Wyoming) where the shell was domiciled. The actions were cheap and almost never contested. The new custodian could then “clean up” the shell and look for a buyer. Internet players began to follow individual shell vendors in the courts where they were active. The moment one who was perceived as arranging “good” deals filed a custodianship petition, stock in the shell would be snapped up, often on heavy volume at ever-increasing prices. That alone was often the play. Finding buyers for a shell can take time, in some cases more than a year. Penny speculators don’t want their money tied up for that long and are more likely to exit after the initial pop in price. 

Obviously, that does not encourage “capital formation.” The SEC wanted to put a stop to the trafficking in shells, but there was a regulatory problem. The agency has for years defined shell companies as:

…any issuer, other than a business combination related shell company… or an asset-backed issuer… that has (1) no or nominal operations and (2) either (i) no or nominal assets, (ii) assets consisting solely of cash and cash equivalents, or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets.

But that only applied to SEC registrants; it did not apply to Pinks not required to make disclosure of any kind. A slightly different and more complex definition was adopted in the final rule:

The definition of shell company that the Commission is adopting does not preclude a broker-dealer, qualified IDQS, or registered national securities association from determining that an entity is a shell company based on an observation that a company has identified itself as a shell company (or as not a shell company) or, alternatively, review of a company’s financial information, including asset composition, operational expenditures, and income-related metrics. The definition of shell company under the amended Rule is consistent with the requirements of other established and broadly used Commission rules to provide market participants flexibility in analyzing the particular facts and circumstances involving an issuer, such as the issuer’s financial information and information related to its operations.

It would seem that considerable responsibility for identifying and dealing with shell companies will now fall to OTC Markets. It has not said how it plans to deal with that.

In the proposed rule, the SEC said it intended to prohibit market makers from relying on the piggyback exception for shell companies. Had that become part of the final rule, all of those companies would quickly have been relegated to the Greys. But cries of outrage from commenters persuaded the agency to compromise, and the result was a modified version of its original proposal:

Under the amended Rule, a broker-dealer may maintain a quoted market for the security of an issuer that the broker-dealer has a reasonable basis under the circumstances for believing is a shell company by relying on the piggyback exception during the 18-month period following the initial publication or submission of a priced bid or offer quotation for the security in an IDQS, assuming all other requirements of the piggyback exception are met… The Commission believes that compliance with the information review requirement is needed following the 18-month period to appropriately balance the facilitation of capital formation and the promotion of investor protection.

There is some confusion about the correct interpretation of “initial publication or submission of a priced bid or offer quotation for the security in an IDQS.” It seems to us it ought to mean that an OTC shell company would, like a SPAC, be able to qualify as compliant with Rule 15c2-11 only if it was new to the market. It would then have 18 months in which to find a buyer.

At the OTC Markets webinar, Zinn explained: 

The way that it works is that for a new company coming on, after September 28th, that is a shell company within the definition of the rule, which includes those that disclose their shell status in their filings, those companies, starting from the point where they’re initially quoted, so that first day when they join the market and a broker-dealer has a priced bid or an ask in the security, they will be able to be quoted for an 18-month period after that.

But he added: “Any company that’s a shell as of September 28th has 18 months from that date to be the subject of a public quote if it remains a shell.” He may be confused by the SEC’s intentions because he finished by saying, “We are obviously constantly talking to the SEC about the application of this rule. This is our understanding based on those conversations, but we’ll also continue to push them to put out more specific guidance…”

Shell vendors may be perplexed as well, taking a wait-and-see stance until September 28. At least one who’s been very successful in recent years seems to be shifting his attention to exchange-listed issuers that might be receptive to a suitor interested in a buyout. The OTC custodianship plays that were attracting so much attention only six months ago have disappeared. 

FINRA Weighs In

FINRA had been silent through the comment period for the proposed rule. Finally, on May 28, 2021, it filed with the SEC its own proposed rule change to members (i.e., broker-dealers’) requirements under FINRA Rule 6432 (Compliance with the Information Requirements of SEA Rule 15c2-11). It posted its proposal at its own website; the SEC did the same on June 9. Only one comment has been submitted to date; it is from OTC Link LLC and was written by Dan Zinn and Cass Sanford.

While FINRA approves of the idea of a qualified IDQS making determinations about an issuer’s compliance with Rule 15c2-11’s current information requirement, it points out that:

Under FINRA Rule 6432, no member may quote a non-exchange-listed security in a quotation medium unless the member has demonstrated compliance with FINRA Rule 6432 and the applicable requirements for information maintenance under Rule 15c2-11 by making a filing with, and in the form required by, FINRA (i.e., the Form 211). The Form 211 is designed to gather pertinent information regarding the subject issuer and security, the members knowledge of and relationship with the issuer, and the member’s intended quotation activities with respect to the security. FINRA uses the Form 211 in connection with its oversight of member compliance with Rule 15c2-11.

FINRA wants to make three amendments to its own Rule 6432. First, the IDQS would be required to submit a modified Form 211 in connection with each initial information review it conducts; second, that the IDQS be obliged to submit a daily security file to FINRA containing summary information for all securities quoted on its system, and finally, “other changes” to Rule 6432 and the Form 211 would be proposed to clarify the new elements of both.

It asks that on the day following the IDQS’s determination of an issuer’s compliance with Rule 15c2-11, it files a modified Form 211 by 6:30 p.m. Eastern time. It sees that as a good way to guarantee that trading will begin as quickly as possible. In a footnote, it adds its bombshell: “…the modified Form 211 must be reviewed and signed by a principal of the Qualified IDQS and the principal must certify, among other things, that neither the firm nor its associated persons have accepted or will accept any payment or other consideration for filing the Form 211.”

For the daily security file submission, FINRA wants:

  • Security symbol;
  • Issuer name;
  • If the non-exchange-listed equity security is being quoted pursuant to a processed Form 211 under FINRA Rule 6432(a);
  • If applicable, the type of publicly available determination made by the Qualified IDQS (e.g., an initial review pursuant to Rule 15c2-11(a)(2), that the required information is current and publicly available under Rule 15c2-11 (f)(2)(iii)(B) or (f)(3)(ii)(A), or an exception under Rule 15c2-11(f)(7)) and the date on which such publicly available determination was made by the Qualified IDQS;
  • With respect to a non-exchange-listed equity security for which the Qualified IDQS has made a publicly available determination under Rule 15c2-11(f)(7) relating to the availability of the piggyback exception under Rule 15c2-11(f)(3), whether the issuer is a shell company and, if a shell company, the number of days remaining in the applicable 18-month period under Rule 15c-2-11(f)(3)(i)(B)(2);
  • If applicable, that the security is being quoted pursuant to an exception that does not rely on the Qualified IDQS’s publicly available determination and, if so, identify the exception relied upon by the subscriber; and
  • Such other information as specified by FINRA in a Regulatory Notice (or similar communication).

Perhaps such a list could be generated automatically and so present no difficulties for OTC Markets, but it seems it would have to be reviewed for accuracy, at least occasionally. Even so, it doesn’t seem to be problematic.

The “other amendments” are less substantive and should present no problems for OTC Markets.

The text of the amended Rule 6432 begins on page 35 of FINRA’s submission.

Zinn and Sanford posted their comment to the SEC on July 6. Their chief interest is in demonstrating that OTC Markets, as an IDQS, ought to be allowed to charge for its services. While they “do not expect the existing application of Rule 5250 to have a significant impact on our ability to perform initial information reviews, …we believe the modernized interpretation and application of Rule 5250 that we propose here would benefit issuers, investors and regulators alike.”

The thrust of Zinn and Sanford’s argument is that the prohibition on compensation for initial information reviews shouldn’t be applied to an IDQS because an IDQS isn’t a broker-dealer. Further, according to FINRA itself, a potential conflict only arises because for a market maker: “Accepting such prohibited payments compromises the independence of a firm’s decision regarding its quoting and market-making activities and, among other things, harms investor confidence in the overall marketplace because investors are unable to ascertain which quotations are based on actual interest and while are supported by issuers or promoters.” But an IDQS does not publish quotations or act as a market maker. It merely facilitates market maker quotations, and so the prohibition on accepting compensation should not extend to a “neutral market operator conducting initial information reviews or filing Form 211s [sic] with FINRA.”

No comment on the daily security file is offered. 

On July 29, the SEC filed a new notice in connection with FINRA’s proposed amendments to Rule 5250. The deadline for the Commission’s decision would have been July 30, but the Division of Trading and Markets, “pursuant to delegated authority,” decided to move the critical date to September 13, by which time “the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change.”

It seems the suspense will continue until September 28 is nearly upon us. In early summer, OTC Markets did its best to encourage non-compliant issuers to submit current information by June 30, noting that early submissions would guarantee compliance by the critical day in September. It says it’s working through applications now and will handle as many as it can, in the order in which they’re received. 

Some, inevitably, will arrive too late. At the webinar in July, Zinn was asked what issuers should do if they end up without published quotations but want to return to normal trading. He replied that they’d have to apply for an Initial Information Review, which is a “higher standard” than the “ongoing information standard” that is being applied during this pre-September 28 period. He added casually that “things like audited financial statements are likely to be required.”

There was no further discussion of that astonishing suggestion. At some time in the future, will Pink Current Information issuers be required to produce audited financials? OTC Markets could do that: it’s a private company and can ask anything it wishes of the issuers that want to be quoted on its trading platform. But many issuers would be displeased and might well seek out a different IDQS.

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 [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 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
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