What Is a Direct Public Offering (DPO) on the OTC Markets?
A Direct Public Offering (DPO) on the OTC Markets allows a private company to make its shares publicly tradable without a traditional IPO or reverse merger. Existing shareholders can sell shares directly once the company is quoted under SEC Rule 15c2-11. A DPO provides liquidity and market visibility without the expense and complexity associated with an exchange listing.
Overview of the OTC Markets Structure
The OTC Markets Group operates three principal trading tiers reflecting varying disclosure levels:
- OTCQX – Top tier for established companies; audited financials, $5 bid minimum, 50+ shareholders.
- OTCQB – Venture tier for developing or reporting issuers; $0.01 bid minimum, current information required.
- OTCID (formerly OTC Pink) – Entry-level tier; must meet Rule 15c2-11 current information standards.
How an OTC DPO Works
In a Direct Public Offering, no new shares are issued. The issuer files disclosures through OTCIQ or EDGAR, a market maker submits Form 211 to FINRA, and after approval, shareholders may resell under Rule 144. Unlike reverse mergers, a DPO maintains a clean corporate structure and transparency.
Benefits of Conducting a DPO
- Lower Costs – No underwriter or roadshow.
2. Faster Market Access – Quotation can occur within weeks once disclosures are current.
3. Shareholder Liquidity – Enables resale under Rule 144.
4. Increased Visibility – OTC Markets data feeds reach Bloomberg and Yahoo Finance.
5. Scalability – Issuers can uplist from OTCID to OTCQB or OTCQX.
Rule 15c2-11 and the FINRA Form 211 Process
Before quotation, Rule 15c2-11 requires a broker-dealer to review public information about the issuer and file Form 211 with FINRA. FINRA verifies financials, share structure, and management information to ensure transparency. Once cleared, the market maker may publish quotes enabling public trading.
When OTC Markets Can Bypass FINRA and Form 211
Following the 2021 amendments to Rule 15c2-11, OTC Markets Group, as a Qualified Interdealer Quotation System (QIQS), may publish quotes without a broker Form 211 when disclosure requirements are met. This reduces delays for compliant issuers.
Reference: SEC Rule 15c2-11 Final Release No. 33-10842
OTC Markets can bypass FINRA if issuer information is current, accurate, publicly available, and verified via OTCIQ. The exemption applies only when the security was previously quoted and not suspended for delinquency.
Form 211 is still required for new issuers, former shells under Rule 144(i), incomplete disclosures, or companies with recent control changes.
Compliance Implications
The QIQS framework accelerates quotations but demands high transparency. Issuers must keep financials, share structures, and beneficial ownership updated. Inaccurate or outdated data can cause automatic demotion to the Expert Market, where only brokers and institutions see quotes.
DPO Preparation Checklist
- Select target tier (OTCID, OTCQB, or OTCQX).
2. Prepare disclosures – financials, officer bios, shareholder list.
3. Engage securities counsel to oversee compliance.
4. Coordinate with a market maker or OTC Markets for review.
5. Confirm transfer agent verification and DTC eligibility.
6. Maintain current information post-quotation.
The Evolving Landscape of OTC DPOs
Modernized Rule 15c2-11 rules and OTC Markets’ QIQS status have made DPOs faster and more predictable. Compliant companies can often begin quotation without lengthy FINRA delays. The DPO is becoming a mainstream route for microcap issuers seeking to go public directly.
Conclusion
A Direct Public Offering (DPO) on the OTC Markets provides a cost-effective and compliant way for private companies to trade publicly. By maintaining current disclosures and understanding when Form 211 can be bypassed, issuers achieve liquidity and credibility in the public markets.
If you would like to take your private company public on the OTC Markets through a DPO or would like to speak to a Securities Attorney, Hamilton & Associates Law Group, P.A. is ready to help. Our Founder, Brenda Hamilton, is a nationally known and recognized securities attorney with over two decades of experience assisting issuers worldwide with going public on the Nasdaq, NYSE, and OTC Markets. Since 1998, Ms. Hamilton has been a leading voice in corporate and securities law, representing both domestic and international clients across diverse industries and jurisdictions. Whether you are taking your company public, raising capital, navigating regulatory challenges, or entering new markets, Brenda Hamilton and her team deliver the experience, strategic insight, and results-driven representation you need to succeed.
To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected].
Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
200 E Palmetto Rd, Suite 103
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com
