Securities Law, NYSE, NASDAQ & OTC Markets Listings & Compliance
SEC and FINRA Enforcement Trends in the OTC Market
Over the past several years, both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have intensified enforcement in the OTC Markets. The focus has shifted sharply toward broker-dealer gatekeeper obligations, fraudulent stock promotions, and manipulative trading.
The amendments to Rule 15c2-11, effective in September 2021, transformed the OTC landscape by requiring publicly available current information before securities can be quoted. Issuers that fail to meet this standard are relegated to the OTC Markets Expert Market, where only certain professional or institutional investors can trade. For an overview of disclosure and listing obligations, see ‘Understanding the “Current Information” Standard: Rule 15c2-11’ on SecuritiesLawyer101.com.
Rule 15c2-11 Enforcement and Broker-Dealer Accountability
Rule 15c2-11 under the Exchange Act prohibits a broker-dealer from publishing quotations for an OTC security unless it has reviewed, retained, and reasonably believes the issuer’s information is accurate and current. The 2020 SEC amendments enhanced transparency by requiring that this information be publicly accessible, closing the door to opaque, “dark” issuers.
These changes support OTC Markets Group’s tiered disclosure system—OTCQX, OTCQB, and OTCID—and have been critical in protecting investors from opaque or fraudulent issuers. OTC Markets’ Rule 15c2-11 FAQs clarify how non-reporting issuers can regain compliance.
Manipulative Trading and Market Manipulation Enforcement
The SEC and FINRA continue to target market manipulation in low-priced securities, including wash and matched trades, spoofing, marking the open or close, and momentum ignition schemes. FINRA’s 2025 Annual Regulatory Oversight Report reaffirmed that microcap manipulation remains a top examination priority, with an emphasis on automated trade surveillance and supervisory escalation.
Recent enforcement actions have resulted in multi-million-dollar penalties and permanent injunctions against traders and firms participating in coordinated schemes. The SEC has charged numerous individuals and entities for hidden ownership and manipulative trading patterns in OTC securities.
Promotion Fraud and Microcap Schemes
Promotion fraud—commonly known as “pump-and-dump”—remains an enforcement mainstay. These schemes often involve coordinated promotional campaigns, misleading social-media posts, and undisclosed insider participation. SEC enforcement actions frequently cite violations of Section 10(b), Rule 10b-5, and Securities Act Sections 5(a) and 5(c).
FINRA Sanctions and Restitution Trends
According to Eversheds Sutherland’s 2024 FINRA Sanctions Study, overall fines decreased slightly, but restitution soared more than 200 percent, highlighting FINRA’s focus on compensating harmed investors. FINRA disciplinary cases increasingly cite supervisory system failures in monitoring low-priced securities and AML deficiencies.
Key Takeaways for Issuers and Broker-Dealers
- Rule 15c2-11 Compliance Is Ongoing — Continuous monitoring of issuer information is required.
- Integrate Surveillance and Quoting Systems — Link quote eligibility with real-time issuer status.
- Enhance AML and SAR Procedures — Microcap transactions are a top regulatory priority.
- Vet Promotional Campaigns — Ensure all affiliations and compensation are fully disclosed.
- Monitor Red Flags — Watch for volume spikes, ticker changes, or sudden rebranding.
Outlook: Coordinated Oversight and Data-Driven Enforcement
The SEC’s Cross-Border Task Force and FINRA’s Market Abuse Unit are expanding analytic capabilities to identify networks of related issuers, promoters, and trading patterns. Broker-dealers and issuers in the OTC Markets should treat compliance as a continuous, proactive process tied to transparency and real-time monitoring.
About Hamilton & Associates Law Group, P.A.
Hamilton & Associates Law Group, based in Boca Raton, Florida, has represented clients in securities and corporate finance matters for more than 25 years. Through its publication SecuritiesLawyer101.com, the firm provides educational resources on going-public transactions, SEC reporting, and OTC Markets compliance.
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
