Securities Law, NYSE, NASDAQ & OTC Markets Listings & Compliance

How the OTC Markets Expert Market Works – Securities Lawyer 101

The 2021 amendments to SEC Rule 15c2-11 reshaped how broker-dealers publish quotations for OTC securities. Under the new framework, only issuers with current, publicly available information can maintain quotations. Issuers that fail to meet disclosure requirements are moved to the OTC Markets Expert Market, where trading is limited to broker-dealers and qualified institutions.

What Is the OTC Markets Expert Market?

The Expert Market is the lowest OTC Markets tier and serves as a restricted venue for institutional participants. It replaces the former ‘No Information’ category, limiting access to professional investors only.

• No public quotation visibility for retail investors.
• Only broker-dealers and qualified institutions can trade.
• Quotations are limited to unsolicited broker-dealer transactions.
• Effective since September 28, 2021, under Rule 15c2-11.

How Issuers Are Downgraded to the Expert Market

OTC Markets monitors issuer disclosures for compliance. Companies with missing or outdated information are automatically downgraded to the Expert Market.

Common downgrade triggers include:

• Failure to post annual or quarterly reports on time.
• Missing Attorney Letter for non-reporting issuers.
• Financials older than 16 months.
• Failure to respond to OTC compliance inquiries.
• Inconsistent share structure or unverified transfer-agent data.

Who Can Trade on the Expert Market

Retail investors cannot trade Expert Market securities. Trading access is restricted to broker-dealers, institutions, and qualified market participants.

Permitted participants include:

• Broker-dealers executing unsolicited transactions.
• Institutional investors and accredited entities.
• Market makers providing liquidity under exemptions.

How the Expert Market Differs from Other Tiers

The Impact of an Expert Market Downgrade

• Public quotations are removed from OTC Markets feeds.
• Liquidity and visibility decline sharply.
• Market makers may withdraw support.
• Capital raising and investor outreach become more difficult.
• Regulatory review by FINRA or the SEC may follow.

How to Regain Current Information Status

Issuers can regain eligibility by completing OTC Markets’ Information Review Process, which mirrors an abbreviated Form 211 review.

• Post all missing annual and quarterly reports.
• Certify accuracy with the CEO/CFO signature.
• Upload a current Attorney Letter with Respect to Current Information.
• Provide a verified share structure and transfer-agent letter.
• Respond promptly to any OTC Markets requests.

Common Pitfalls During Restoration

• Submitting partial or outdated financials.
• Omitting transfer-agent verification.
• Attorney Letter based on incomplete data.
• Ignoring OTC compliance notices.
• Discrepancies between filings and corporate records.

Key Takeaways for Issuers

• Rule 15c2-11 requires continuous public disclosure.
• Downgrading to Expert Market restricts retail trading.
• Restoration requires full disclosure and attorney certification.
• Timely filings protect liquidity and investor access.

Conclusion

The OTC Markets Expert Market serves an important compliance function by restricting trading in issuers lacking current disclosures. For companies, it represents a serious downgrade with significant consequences for liquidity and investor confidence. Maintaining timely disclosures and responsive communication with OTC Markets is essential to avoid suspension or delisting.

Hamilton & Associates Law Group assists issuers and market participants with Rule 15c2-11 compliance, OTC Markets restoration, and Expert Market eligibility reviews.

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