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

Common Disclosure Deficiencies Leading to OTC Markets Suspension

The OTC Markets Group serves as a central trading venue for thousands of public companies. Under Rule 15c2-11, broker-dealers may only publish quotations for issuers with current, publicly available information. When disclosures are missing, inconsistent, or unreliable, OTC Markets may suspend quotation or downgrade the issuer to the Expert Market, restricting trading to broker-dealers and institutions.

Failure to Provide Timely Annual or Quarterly Reports

Issuers on OTCQX, OTCQB, or OTCID Current Information tiers must post annual and quarterly financials within the required timeframes. Missing or outdated filings often trigger automatic downgrade or suspension.

Common violations include:

• Outdated or incomplete financial statements.
• Missing MD&A comparisons or liquidity analysis.
• Delayed filings for multiple quarters.

Inconsistent Share-Structure Disclosures

OTC Markets requires issuers to disclose authorized, issued, and outstanding shares with transfer-agent verification. Mismatched share counts or unverified data often cause downgrades.

• Outdated transfer-agent confirmations.
• Unreported share issuances or splits.
• Inconsistent data across Manager Certifications and profiles.

Missing Manager’s Certification

Non-reporting issuers must file a Manager’s Certification with Respect to Current Information. The Certification is due within 45 days after the annual report is filed. The Manager’s Certification is used for the following purposes:

• Confirms what reporting requirements the company is subject to.
• Certifies that the company understands its reporting obligations.
• Confirms information regarding the company’s counsel, officers, directors, large shareholders, and convertible debt holders.

Contradictory or Promotional Press Releases

Material disclosures must align with filed financials and business information. Promotional statements inconsistent with filings can lead to suspension under Rule 10b-5.

• Exaggerated claims or partnerships not supported by filings.
• Announcements of transactions that never close.
• Paid promotions that lack disclosure or context.

Outdated or Non-Independent Auditors

OTC Markets verifies auditor registration and independence. Audits by non-registered or barred accountants invalidate issuer financials.

• Use of non-PCAOB auditors.
• Unreported auditor changes.
• False representation of financials as audited.

Related-Party Transactions Not Disclosed

Item 404 of Regulation S-K requires disclosure of related-party transactions exceeding $120,000 or material to investors.

• Unreported loans or convertible notes to insiders.
• Undisclosed director or officer compensation.
• Affiliate transactions that are inconsistent with filings.

Lack of Corporate Governance and Contact Information

OTC Markets requires accurate company contact details, officer lists, and investor-relations access. Inconsistent or missing governance disclosures can cause temporary suspensions.

Misuse of the OTC Markets OTCIQ Portal

OTCIQ is the secure portal for issuer disclosures. Incomplete uploads or unauthorized users can trigger compliance intervention.

• Incomplete uploads or missing exhibits.
• Duplicate placeholder filings.
• Unauthorized representatives submitting filings.

Failure to Respond to OTC Markets Inquiries

Failure to respond to OTC Markets compliance requests within designated timeframes results in a downgrade to Limited Information or suspension.

False or Misleading Statements to OTC Markets

Providing false or fabricated documentation—such as fake audits or signatures—leads to immediate suspension and potential SEC referral.

Conclusion

OTC Markets enforces strict disclosure standards under Rule 15c2-11 to ensure transparency. Issuers that fail to maintain accurate and consistent disclosures risk suspension or downgrade to the Expert Market. Maintaining compliance and prompt communication with OTC Markets protects liquidity and investor trust.

Hamilton & Associates Law Group assists issuers, attorneys, and transfer agents with Rule 15c2-11 compliance, OTCIQ filings, and enforcement mitigation strategies.

For more information about going public and Regulation A, securities law or our other services, please contact Brenda Hamilton at Hamilton & Associates Law Group, P.A. 200 E Palmetto Park Rd, Suite 103, Boca Raton, Florida, (561) 416-8956 or by email at [email protected].